UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    FORM 10-K

(Mark One)

[x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
                                  ACT OF 1934

                   For the fiscal year ended December 31, 1998

                                       OR

    [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                        For the transition period from to


                         Commission file number 0-19139

                           CNL INCOME FUND VIII, LTD.
             (Exact name of registrant as specified in its charter)

                      Florida                            59-2963338
          (State or other jurisdiction of   (I.R.S. Employer Identification No.)
          incorporation or organization)

                              400 East South Street
                             Orlando, Florida 32801
          (Address of principal executive offices, including zip code)

       Registrant's telephone number, including area code: (407) 650-1000

               Securities registered pursuant to Section 12(b) of
                                    the Act:

                 Title of each class:     Name of exchange on which registered:
                         None                        Not Applicable

               Securities registered pursuant to Section 12(g) of
                                    the Act:

               Units of limited partnership interest ($1 per Unit)
                                (Title of class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the preceding 12 months (or such shorter  period that the registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days: Yes X No

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [x]

         Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 35,000,000 units of limited
partnership  interest  (the  "Units") on Form S-11 under the  Securities  Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $1 per Unit.

                      DOCUMENTS INCORPORATED BY REFERENCE:
                                      None


<PAGE>


                                               
                                     PART I


Item 1.  Business

         CNL Income Fund VIII, Ltd. (the "Registrant" or the "Partnership") is a
limited  partnership  which was  organized  pursuant to the laws of the State of
Florida on August 18, 1989. The general  partners of the  Partnership are Robert
A.  Bourne,  James  M.  Seneff,  Jr.  and  CNL  Realty  Corporation,  a  Florida
corporation  (the  "General  Partners").   Beginning  on  August  2,  1990,  the
Partnership offered for sale up to $35,000,000 of limited partnership  interests
(the  "Units")  (35,000,000  Units at $1 per Unit)  pursuant  to a  registration
statement on Form S-11 under the Securities  Act of 1933, as amended,  effective
January 30, 1990.  The offering  terminated  on March 7, 1991, at which date the
maximum  offering  proceeds of $35,000,000  had been received from investors who
were admitted to the Partnership as limited partners (the "Limited Partners").

         The  Partnership  was organized to acquire both newly  constructed  and
existing  restaurant  properties,  as well as properties upon which  restaurants
were to be  constructed  (the  "Properties"),  which  are  leased  primarily  to
operators of national and regional fast-food and family-style  restaurant chains
(the "Restaurant Chains").  Net proceeds to the Partnership from its offering of
Units,  after  deduction  of  organizational  and  offering  expenses,  totalled
$30,975,000,  and were used to acquire 38  Properties,  including  interests  in
eight  Properties  owned  by  joint  ventures  in  which  the  Partnership  is a
co-venturer,  and  to  establish  a  working  capital  reserve  for  Partnership
purposes.  During the year ended  December 31, 1995,  the  Partnership  sold its
Property in Ocoee, Florida and reinvested the majority of the net sales proceeds
in a Shoney's in North Fort Myers, Florida. Also, during the year ended December
31, 1995, the Partnership sold two Properties in Jacksonville,  Florida.  During
the year ended December 31, 1996, the  Partnership  reinvested the remaining net
sales proceeds from the 1995 sale of the Property in Ocoee,  Florida, to acquire
one  additional  Property  indirectly  through  a joint  venture  in  which  the
Partnership is a co-venturer. Also, during the year ended December 31, 1996, the
Partnership  sold its  Property  in Orlando,  Florida.  As a result of the above
transactions  as of  December  31,  1998,  the  Partnership  currently  owns  36
Properties,  including  interests in nine Properties  owned by joint ventures in
which  the  Partnership  is  a  co-venturer.  The  Properties  are  leased  on a
triple-net  basis with the lessees  responsible for all repairs and maintenance,
property taxes, insurance and utilities.

         On March 11, 1999, the  Partnership  entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership  would be merged with and into a subsidiary  of APF (the  "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term,  "triple-net" basis to operators of
national and regional  restaurant  chains. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger.  At a special meeting of the partners that is expected to be held in
the third  quarter  of 1999,  Limited  Partners  holding in excess of 50% of the
Partnership's  outstanding limited partnership interests must approve the Merger
prior to consummation of the transaction. If the Limited Partners at the special
meeting approve the Merger,  APF will own the Properties and other assets of the
Partnership. See Item 8.
Financial Statements and Supplementary Data -- Note 11. Subsequent Event.

         In the event that the Limited  Partners  vote  against the Merger,  the
Partnership will hold its Properties  until the General Partners  determine that
the sale or other  disposition of the Properties is  advantageous in view of the
Partnership's investment objectives. In deciding whether to sell Properties, the
General Partners will consider factors such as potential  capital  appreciation,
net cash flow and federal income tax  considerations.  Certain lessees also have
been granted  options to purchase  Properties,  generally at the Property's then
fair market value after a specified  portion of the lease term has elapsed.  The
Partnership  has no  obligation  to sell all or any portion of a Property at any
particular  time,  except as may be required  under  property  purchase  options
granted to certain lessees.

Leases

         Although there are variations in the specific terms of the leases,  the
following  is  a  summarized   description  of  the  general  structure  of  the
Partnership's  leases. The leases of the Properties owned by the Partnership and
the joint ventures in which the Partnership is a co-venturer provide for initial
terms,  ranging  from 14 to 20 years (the  average  being 18 years),  and expire
between 2005 and 2016.  All leases are on a triple-net  basis,  with the lessees
responsible  for all repairs and  maintenance,  property  taxes,  insurance  and
utilities.  The leases of the Properties  provide for minimum base annual rental
payments (payable in monthly installments) ranging from approximately $41,300 to
$213,800.  All of the leases  provide  for  percentage  rent,  based on sales in
excess of a specified  amount.  In  addition,  a majority of the leases  provide
that,  commencing in specified  lease years (ranging from the third to the sixth
lease  year),  the annual base rent  required  under the terms of the lease will
increase.

         Generally,  the  leases  of the  Properties  provide  for  two to  four
five-year  renewal  options  subject  to the same  terms and  conditions  as the
initial  lease.  Certain  lessees  also have been  granted  options to  purchase
Properties at the Property's then fair market value after a specified portion of
the lease  term has  elapsed.  Under the terms of  certain  leases,  the  option
purchase  price  may equal  the  Partnership's  original  cost to  purchase  the
Property (including  acquisition  costs),  plus a specified  percentage from the
date of the lease or a specified percentage of the Partnership's purchase price,
if that amount is greater than the Property's  fair market value at the time the
purchase option is exercised.

         The leases also  generally  provide that, in the event the  Partnership
wishes to sell the Property  subject to that lease,  the Partnership  first must
offer the  lessee  the right to  purchase  the  Property  on the same  terms and
conditions,  and for the same  price,  as any offer  which the  Partnership  has
received for the sale of the Property.

         During 1994,  the lease  relating to the Property in Tiffin,  Ohio, was
amended to provide for the payment of reduced annual base rent with no scheduled
rent increases.  However,  the lease amendment  provided for a lower  percentage
rent breakpoint,  as compared to the original lease agreement, a change that was
designed  to  result  in  higher  percentage  rent  payments  at any  time  that
percentage rent became payable. In accordance with a provision in the amendment,
as a result of the tenant  assigning the lease to a new tenant during 1998,  the
rents  under  the  assigned  lease  reverted  back to those  required  under the
original lease agreement.

         During 1998, the leases  relating to the Burger King  Properties in New
City and  Syracuse,  New York and New  Philadelphia  and  Mansfield,  Ohio,  and
Asheville,  North  Carolina,  were amended to provide for rent  reductions  from
August 1998 through the end of the lease terms.

Major Tenants

         During 1998,  three  lessees of the  Partnership  and its  consolidated
joint venture,  Golden Corral  Corporation,  Carrols  Corporation and Restaurant
Management  Services,  Inc.,  each  contributed  more  than ten  percent  of the
Partnership's   total  rental   income   (including   rental   income  from  the
Partnership's  consolidated joint venture and the Partnership's  share of rental
income from eight Properties  owned by  unconsolidated  joint  ventures).  As of
December  31,  1998,  Golden  Corral  Corporation  was the lessee  under  leases
relating to four  restaurants,  Carrols  Corporation was the lessee under leases
relating to five restaurants and Restaurant  Management  Services,  Inc. was the
lessee under leases relating to five restaurants.  It is anticipated that, based
on the minimum rental payments required by the leases,  these three lessees each
will continue to  contribute  more than ten percent of the  Partnership's  total
rental  income in 1999.  In addition,  three  Restaurant  Chains,  Golden Corral
Family Steakhouse Restaurants, Burger King and Shoney's, each accounted for more
than ten percent of the  Partnership's  total rental  income in 1998  (including
rental  income  from  the  Partnership's  consolidated  joint  venture  and  the
Partnership's   share  of  rental   income  from  eight   Properties   owned  by
unconsolidated  joint  ventures).  In 1999, it is  anticipated  that these three
Restaurant Chains each will continue to account for more than ten percent of the
Partnership's total rental income to which the Partnership is entitled under the
terms of the leases.  Any failure of these  lessees or  Restaurant  Chains could
materially  affect the  Partnership's  income if the  Partnership is not able to
re-lease  the  Properties  in a timely  manner.  No  single  tenant  or group of
affiliated tenants lease Properties with an aggregate carrying value,  excluding
acquisition fees and certain  acquisition  expenses,  in excess of 20 percent of
the total assets of the Partnership.

Joint Venture Arrangements

         The Partnership has entered into a joint venture  arrangement,  Woodway
Joint Venture, with an unaffiliated entity to purchase and hold one Property. In
addition,  the  Partnership  has  entered  into  three  separate  joint  venture
arrangements,  Asheville  Joint  Venture,  CNL  Restaurant  Investments  II, and
Middleburg  Joint Venture with affiliates of the General  Partners,  to purchase
and hold eight Properties.



<PAGE>


         The joint  venture  arrangements  provide for the  Partnership  and its
joint venture  partners to share in all costs and benefits  associated  with the
joint ventures in accordance with their respective  percentage  interests in the
joint ventures.  The Partnership and its joint venture partners are also jointly
and severally  liable for all debts,  obligations  and other  liabilities of the
joint ventures.

         Woodway Joint Venture,  Asheville  Joint Venture and  Middleburg  Joint
Venture each have an initial term of 20 years and,  after the  expiration of the
initial term,  continue in existence from year to year unless  terminated at the
option  of  either  joint  venturer  or by an event of  dissolution.  Events  of
dissolution  include the  bankruptcy,  insolvency  or  termination  of any joint
venturer,  sale of the Property owned by the joint venture and mutual  agreement
of the Partnership and each joint venture partner to dissolve the joint venture.
CNL Restaurant  Investments II's joint venture  agreement does not provide for a
fixed term,  but  continues in existence  until  terminated  by any of the joint
venturers.

         The  Partnership  has  management  control of Woodway Joint Venture and
shares  management  control equally with affiliates of the General  Partners for
Asheville  Joint  Venture,  CNL Restaurant  Investments II and Middleburg  Joint
Venture.  The joint venture agreements restrict each venturer's ability to sell,
transfer or assign its joint venture interest without first offering it for sale
to its joint venture partner,  either upon such terms and conditions as to which
the venturers may agree or, in the event the venturers cannot agree, on the same
terms and  conditions  as any offer from a third  party to  purchase  such joint
venture interest.

         Net cash flow from operations of Woodway Joint Venture, Asheville Joint
Venture,  CNL  Restaurant   Investments  II  and  Middleburg  Joint  Venture  is
distributed 87.68%, 85.54%, 36.8%, and 12.46%, respectively,  to the Partnership
and the balance is  distributed  to each of the other joint venture  partners in
accordance with their respective  percentage interest in the joint venture.  Any
liquidation  proceeds,  after paying joint  venture  debts and  liabilities  and
funding reserves for contingent  liabilities,  will be distributed  first to the
joint venture  partners with positive  capital account balances in proportion to
such balances  until such balances  equal zero,  and thereafter in proportion to
each joint venture partner's percentage interest in the joint venture.

Certain Management Services

         CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain  services  relating to management of the  Partnership and its Properties
pursuant to a management  agreement with the Partnership.  Under this agreement,
CNL  Fund  Advisors,   Inc.  is  responsible  for  collecting  rental  payments,
inspecting  the  Properties  and the tenants'  books and records,  assisting the
Partnership  in  responding  to  tenant  inquiries  and  notices  and  providing
information  to  the  Partnership  about  the  status  of  the  leases  and  the
Properties.  CNL Fund  Advisors,  Inc.  also  assists  the  General  Partners in
negotiating the leases.  For these  services,  the Partnership has agreed to pay
CNL  Fund  Advisors,  Inc.  an  annual  fee of one  percent  of the sum of gross
operating  revenues from  Properties  wholly owned by the  Partnership  plus the
Partnership's  allocable  share of gross revenues of joint ventures in which the
Partnership  is a  co-venturer,  but  not in  excess  of  competitive  fees  for
comparable  services.  Under the  management  agreement,  the  management fee is
subordinated  to receipt by the Limited  Partners of an aggregate,  ten percent,
cumulative,  noncompounded annual return on their adjusted capital contributions
(the "10% Preferred  Return"),  calculated in accordance with the  Partnership's
limited  partnership  agreement (the  "Partnership  Agreement").  In any year in
which the Limited  Partners  have not  received  the 10%  Preferred  Return,  no
management fee will be paid.

         The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.

Competition

         The fast-food and family-style  restaurant business is characterized by
intense  competition.  The restaurants on the Partnership's  Properties  compete
with  independently  owned  restaurants,  restaurants which are part of local or
regional chains and restaurants in other well-known  national chains,  including
those offering different types of food and service.



<PAGE>


Employees

         The  Partnership   has  no  employees.   The  officers  of  CNL  Realty
Corporation  and the officers and employees of CNL Fund Advisors,  Inc.  perform
certain  services for the  Partnership.  In addition,  the General Partners have
available to them the  resources  and expertise of the officers and employees of
CNL Group, Inc., a diversified real estate company, and its affiliates,  who may
also perform certain services for the Partnership.


Item 2.  Properties

         As of December 31, 1998,  the  Partnership  owned,  either  directly or
through  joint  venture  arrangements,  36  Properties  located  in  12  states.
Reference  is made to the Schedule of Real Estate and  Accumulated  Depreciation
filed  with this  report for a listing of the  Properties  and their  respective
costs, including acquisition fees and certain acquisition expenses.

Description of Properties

         Land. The Partnership's  Property sites range from approximately 17,400
to 467,400  square  feet  depending  upon  building  size and local  demographic
factors.  Sites  purchased  by  the  Partnership  are  in  locations  zoned  for
commercial use which have been reviewed for traffic patterns and volume.

         Buildings.  Each of the Properties owned by the Partnership  includes a
building that is one of a Restaurant  Chain's  approved  designs.  The buildings
generally are  rectangular  and are  constructed  from various  combinations  of
stucco,  steel,  wood, brick and tile.  Building sizes range from  approximately
1,300 to 10,900 square feet.  All buildings on Properties are  freestanding  and
surrounded by paved  parking  areas.  Buildings  are suitable for  conversion to
various uses, although modifications may be required prior to use for other than
restaurant operations.

         Generally,  a  lessee  is  required,  under  the  terms  of  its  lease
agreement,  to make such capital  expenditures as may be reasonably necessary to
refurbish  buildings,  premises,  signs and  equipment  so as to comply with the
lessee's  obligations,  if applicable,  under the franchise agreement to reflect
the current commercial image of its Restaurant Chain. These capital expenditures
are required to be paid by the lessee during the term of the lease.

         Leases  with  Major   Tenants.   The  terms  of  the  leases  with  the
Partnership's  major  tenants as of December  31,  1998 (see Item 1.  Business -
Major Tenants), are substantially the same as those described in Item 1.
Business -Leases.

         Golden Corral  Corporation leases four Golden Corral  restaurants.  The
initial  term of each  lease is 15 years  (expiring  in  2005)  and the  average
minimum base annual rent is approximately  $163,500 (ranging from  approximately
$145,500 to $189,700).

         Restaurant Management Services leases four Shoney's restaurants and one
Popeyes restaurant. The initial term of each lease is 20 years (expiring between
2010 and  2015)  and the  average  minimum  base  annual  rent is  approximately
$104,500 (ranging from approximately $41,300 to $139,400).

         Carrols Corporation leases five Burger King restaurants.  The initial
term of each lease is 20 years  (expiring in 2011) and the average  minimum base
annual rent is  approximately  $89,600  (ranging from  approximately  $83,000 to
$98,000).

         The General Partners consider the Properties to be well-maintained  and
sufficient for the Partnership's operations.


Item 3.  Legal Proceedings

         Neither the  Partnership,  nor its General Partners or any affiliate of
the General Partners, nor any of their respective properties,  is a party to, or
subject to, any material pending legal proceedings.


Item 4.  Submission of Matters to a Vote of Security Holders

         Not applicable.
                                                       PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

         As of March 11, 1999,  there were 3,430 holders of record of the Units.
There is no public trading market for the Units,  and it is not anticipated that
a public  market for the Units will develop.  Limited  Partners who wish to sell
their  Units  may  offer  the  Units  for  sale  pursuant  to the  Partnership's
distribution  reinvestment  plan (the "Plan"),  and Limited Partners who wish to
have their  distributions  used to acquire additional Units (to the extent Units
are  available  for  purchase),  may do so  pursuant  to such Plan.  The General
Partners have the right to prohibit  transfers of Units.  From inception through
December 31, 1998, the price paid for any Unit transferred  pursuant to the Plan
was $.95 per Unit. The price paid for any Unit  transferred  other than pursuant
to the Plan was subject to negotiation by the purchaser and the selling  Limited
Partner. The Partnership will not redeem or repurchase Units.

         The following table reflects,  for each calendar quarter, the high, low
and average  sales prices for transfers of Units during 1998 and 1997 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>


                                                    1998 (1)                               1997 (1)
                                         --------------------------------      ---------------------------------
                                          High       Low        Average         High        Low        Average
                                         -------    -------    ----------      --------    -------    ----------
<S> <C>
         First Quarter                      (2)        (2)           (2)         $1.00      $ .80         $ .91
         Second Quarter                   $ .98       $.80          $.92           (2)        (2)           (2)
         Third Quarter                      .95        .95           .95          1.00        .88           .94
         Fourth Quarter                    1.00        .76           .92           (2)        (2)           (2)
</TABLE>

(1)      A total of  255,125  and  62,676  Units  were  transferred  other  than
         pursuant  to the Plan for the years ended  December  31, 1998 and 1997,
         respectively.

(2)      No transfer of Units took place during the quarter  other than pursuant
         to the Plan.

         The  capital  contribution  per Unit was $1.  All  cash  available  for
distribution  will be distributed to the partners  pursuant to the provisions of
the Partnership Agreement.

         For the  years  ended  December  31,  1998 and  1997,  the  Partnership
declared cash distributions of $3,850,003 and $3,150,003,  respectively,  to the
Limited Partners. For each of the quarters ended March 31, 1998 and December 31,
1998, the Partnership declared special  distributions to the Limited Partners of
$350,000,  which represented  cumulative excess operating  reserves.  No amounts
distributed  to partners  for the years ended  December  31, 1998 and 1997,  are
required to be or have been  treated by the  Partnership  as a return of capital
for  purposes of  calculating  the Limited  Partners'  return on their  adjusted
capital  contributions.  No distributions have been made to the General Partners
to date. As indicated in the chart below,  these  distributions were declared at
the close of each of the Partnership's calendar quarters.  These amounts include
monthly  distributions  made in arrears  for the  Limited  Partners  electing to
receive distributions on this basis.

                  Quarter Ended               1998              1997
                  -------------
                                          -------------      ------------
                  March 31                  $1,137,500         $ 787,500
                  June 30                      787,501           787,501
                  September 30                 787,501           787,501
                  December 31                1,137,501           787,501

         The  Partnership  intends to  continue  to make  distributions  of cash
available  for  distribution  to the  Limited  Partners  on a  quarterly  basis,
although some Limited  Partners,  in  accordance  with their  election,  receive
monthly distributions, for an annual fee.



<PAGE>


Item 6.  Selected Financial Data
<TABLE>
<CAPTION>

                                           1998           1997           1996            1995            1994
                                       -------------  -------------- -------------- ---------------  --------------
<S> <C>
Year ended December 31:
     Revenues (1)                       $ 3,625,906    $ 3,619,489     $ 3,593,610     $ 3,667,137     $ 3,670,207
     Net income (2)                       3,288,912      3,241,567       3,096,992       3,336,755       3,308,267
     Cash distributions
         declared (3)                     3,850,003      3,150,003       3,412,500       3,325,002       3,307,500
     Net income per Unit (2)                  0.093          0.092           0.088           0.094           0.094
     Cash distributions declared
         per Unit (3)                         0.110          0.090           0.098           0.095           0.095

At December 31:
     Total assets                       $32,071,119    $32,258,296     $32,437,106     $32,575,586     $32,615,349
     Partners' capital                   30,655,307     31,216,398      31,124,834      31,440,342      31,428,589
</TABLE>

(1)      Revenues  include equity in earnings of  unconsolidated  joint ventures
         and minority interest in income of the consolidated joint venture.

(2)      Net income  for the year ended  December  31,  1998 and 1995,  includes
         $108,176  and  $71,638,  respectively,  from  gain on sale of land  and
         buildings.  In  addition,  net income for the years ended  December 31,
         1996 and 1995, includes $99,031 and $11,712, respectively,  from a loss
         on sale of land and buildings.

(3)      Distributions  for the years ended  December 31, 1998,  1996, and 1995,
         include  special  distributions  to the Limited  Partners of  $350,000,
         $262,500,  and $175,000,  respectively,  which  represented  cumulative
         excess operating  reserves.  Distributions  for the year ended December
         31, 1998  include an  additional  special  distribution  to the Limited
         Partners of $350,000 declared the first quarter of 1998 from cumulative
         excess operating reserves.

         The above selected  financial  data should be read in conjunction  with
the financial statements and related notes contained in Item 8 hereof.


Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

         The  Partnership was organized on August 18, 1989, to acquire for cash,
either directly or through joint venture  arrangements,  both newly  constructed
and  existing  restaurant  Properties,  as well as land  upon  which  restaurant
Properties  were to be constructed,  which are leased  primarily to operators of
selected national and regional fast-food and family-style Restaurant Chains. The
leases are triple-net  leases,  with the lessee  generally  responsible  for all
repairs and maintenance, property taxes, insurance and utilities. As of December
31, 1998, the  Partnership  owned 36 Properties,  either  directly or indirectly
through joint venture arrangements.

Liquidity and Capital Resources

         The  Partnership's  primary  source  of  capital  for the  years  ended
December 31, 1998, 1997, and 1996 was cash from operations  (which includes cash
received from tenants,  distributions from joint ventures and interest received,
less cash paid for expenses).  Cash from operations was $3,562,592,  $3,543,056,
and  $3,462,668  for  the  years  ended  December  31,  1998,  1997,  and  1996,
respectively.  The  increase in cash from  operations  for 1998,  as compared to
1997, was primarily a result of changes in the  Partnership's  working  capital,
and the  increase in cash from  operations  for 1997,  as compared to 1996,  was
primarily a result of changes in income and expenses as discussed in "Results of
Operations" below and changes in the Partnership's working capital.

         Other  sources and uses of capital  included the  following  during the
years ended December 31, 1998, 1997, and 1996.



<PAGE>


         In May  1996,  the  Partnership  reinvested  the  remaining  net  sales
proceeds of approximately  $234,100 from the 1995 sale of the Property in Ocoee,
Florida,  in Middleburg  Joint Venture.  The  Partnership  has an approximate 12
percent  interest in the profits and losses of Middleburg  Joint Venture and the
remaining  interest  in  this  joint  venture  is held  by an  affiliate  of the
Partnership which has the same General Partners.

         In October 1996, the Partnership sold its Property in Orlando, Florida,
to the tenant for $1,375,000.  In connection therewith, the Partnership accepted
a promissory  note in the principal sum of  $1,388,568,  representing  the gross
sales  price  of  $1,375,000  plus  tenant  closing  costs of  $13,568  that the
Partnership financed on behalf of the tenant. The promissory note bears interest
at a rate of  10.75%  per  annum  and is  collateralized  by a  mortgage  on the
Property.  The promissory note is being collected in 12 monthly  installments of
interest only,  afterwards,  in 24 monthly installments of $15,413 consisting of
principal and interest,  and thereafter in 144 monthly  installments  of $16,220
consisting of principal and interest.  The mortgage note receivable  balances at
December 31, 1998 and 1997 of $1,356,466 and $1,394,979,  respectively,  include
accrued  interest  of  $12,044  and  $12,386,  respectively,  relating  to  this
Property.  Proceeds  received from the  collection of this mortgage note will be
distributed  to the  Limited  Partners  or will be used  for  other  Partnership
purposes.  This Property was originally  acquired by the Partnership in December
1990 and had a cost of approximately $1,177,000,  excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the Property
for approximately  $198,000 in excess of its original purchase price. Due to the
fact  that the  Partnership  had  recognized  accrued  rental  income  since the
inception of the lease relating to the straight lining of future  scheduled rent
increases in accordance  with  generally  accepted  accounting  principles,  the
Partnership  wrote off the  cumulative  balance of such accrued rental income at
the  time of the  sale of this  Property,  resulting  in a loss of  $99,031  for
financial reporting purposes. Due to the fact that the straight lining of future
scheduled  rent  increases  over the term of the lease is a non-cash  accounting
adjustment,  the write off of these  amounts is a loss for  financial  statement
purposes only.

         In July 1998, the  Partnership  received  $116,397 as a settlement from
the Florida Department of Transportation for a right of way taking relating to a
parcel of land on its Property in Brooksville, Florida. In connection therewith,
the Partnership  recognized a gain of $108,176 for financial reporting purposes.
The Partnership anticipates that it will distribute amounts sufficient to enable
the limited  partners to pay federal and state income taxes,  if any (at a level
reasonably  assumed by the general  partners),  resulting  from the right of way
taking.  The  Partnership  intends to reinvest  the  proceeds  in an  additional
Property or use the funds for other Partnership purposes.

         None of the Properties  owned by the  Partnership or the joint ventures
in which the  Partnership  owns an interest is or may be  encumbered.  Under its
Partnership  Agreement,  the  Partnership  is prohibited  from borrowing for any
purpose;  provided,  however,  that the General Partners or their affiliates are
entitled to reimbursement,  at cost, for actual expenses incurred by the General
Partners or their  affiliates  on behalf of the  Partnership.  Affiliates of the
General Partners from time to time incur certain operating expenses on behalf of
the  Partnership  for which the  Partnership  reimburses the affiliates  without
interest.

         Currently,  rental income from the Partnership's Properties is invested
in money market accounts or other short-term,  highly liquid investments pending
the  Partnership's  use of such  funds to pay  Partnership  expenses  or to make
distributions  to the  partners.  At December  31,  1998,  the  Partnership  had
$1,809,258 invested in such short-term  investments as compared to $1,602,236 at
December 31, 1997.  The increase  during 1998, as compared to 1997, is primarily
due to the receipt of a  settlement  for a  right-of-way  taking  related to the
Partnership's  Property in Brooksville,  Florida,  as described above. The funds
remaining  at December 31, 1998,  after the payment of  distributions  and other
liabilities,  will be used to meet the  Partnership's  working capital and other
needs.

         During 1998, 1997, and 1996, affiliates incurred $98,613,  $80,998, and
$100,264,   respectively,  for  certain  operating  expense  on  behalf  of  the
Partnership.  As of December 31, 1998 and 1997 the Partnership  owed $20,216 and
$4,599,  respectively,  to  affiliates  for  such  amounts  and  accounting  and
administrative  services.  As of March 11, 1999, the  Partnership had reimbursed
the  affiliates all such amounts.  In addition,  during the years ended December
31, 1996 and 1995 the Partnership incurred $41,250 and $13,800, respectively, in
real estate  disposition fees due to an affiliate as a result of its services in
connection  with  the  sale of the  Property  in  Orlando,  Florida  and the two
Properties in Jacksonville,  Florida. No such fees were incurred during the year
ended December 31, 1998 and 1997. The payment of such fees is deferred until the
Limited  Partners have received the sum of their 10% Preferred  Return and their
adjusted capital contributions.  Other liabilities of the Partnership, including
distributions  payable,  increased to  $1,231,946  at December  31,  1998,  from
$873,875 at December 31, 1997.  The increase in other  liabilities  is primarily
attributable to the Partnership's accruing a special distribution payable to the
Limited  Partners of  $350,000 at December  31,  1998,  from  cumulative  excess
operating reserves.  No special distribution payable was accrued at December 31,
1997. The General  Partners  believe that the Partnership has sufficient cash on
hand to meet its current working capital needs.

         Based on cash from  operations,  and for the years ended  December  31,
1998 and 1996,  cumulative excess operating reserves,  the Partnership  declared
distributions to the Limited Partners of $3,850,003,  $3,150,003, and $3,412,500
for the years ended  December  31,  1998,  1997,  and 1996,  respectively.  This
represents  distributions  of $0.110  per Unit for the year ended  December  31,
1998,  $0.090 per Unit for the year ended December 31, 1997, and $0.098 per Unit
for the year ended  December 31,  1996.  No amounts  distributed  to the Limited
Partners for the years ended December 31, 1998,  1997, and 1996, are required to
be or have been treated by the  Partnership  as a return of capital for purposes
of  calculating  the  Limited   Partners'   return  on  their  adjusted  capital
contributions. The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis.

         The General Partners believe that the Properties are adequately covered
by  insurance.  In  addition,  the General  Partners  have  obtained  contingent
liability and property coverage for the Partnership.  This insurance is intended
to reduce the Partnership's  exposure in the unlikely event a tenant's insurance
policy lapses or is insufficient to cover a claim relating to the Property.

         The Partnership's  investment strategy of acquiring Properties for cash
and  leasing  them under  triple-net  leases to  operators  who  generally  meet
specified financial  standards  minimizes the Partnership's  operating expenses.
The General Partners believe that the leases will continue to generate cash flow
in excess of operating expenses.

         Due to low  operating  expenses  and  ongoing  cash flow,  the  General
Partners believe that the Partnership has sufficient working capital reserves at
this time. In addition,  because all leases of the Partnership's  Properties are
on a  triple-net  basis,  it is not  anticipated  that a  permanent  reserve for
maintenance  and  repairs  will be  established  at this  time.  To the  extent,
however,  that the Partnership  has  insufficient  funds for such purposes,  the
General Partners will contribute to the Partnership an aggregate amount of up to
one percent of the offering proceeds for maintenance and repairs.

         The General  Partners have the right,  but not the obligation,  to make
additional capital  contributions if they deem it appropriate in connection with
the operations of the Partnership.

         On March 11, 1999, the  Partnership  entered into an Agreement and Plan
of Merger with APF,  pursuant to which the Partnership  would be merged with and
into a subsidiary  of APF. As  consideration  for the Merger,  APF has agreed to
issue  4,042,635  APF Shares  which,  for the  purposes  of  valuing  the merger
consideration,  have been valued by APF at $10.00 per APF Share,  the price paid
by APF  investors in APF's most recent public  offering.  In order to assist the
General  Partners in evaluating the proposed merger  consideration,  the General
Partners  retained  Valuation  Associates,  a nationally  recognized real estate
appraisal firm, to appraise the  Partnership's  restaurant  property  portfolio.
Based on Valuation Associates'  appraisal,  the Partnership's property portfolio
and other assets were valued on a going concern basis  (meaning the  Partnership
continues  unchanged) at  $39,843,631  as of December 31, 1998.  Legg Mason Wood
Walker,  Incorporated  has  rendered  a  fairness  opinion  that  the APF  Share
consideration, payable by APF, is fair to the Partnership from a financial point
of view.  The APF Shares are  expected  to be listed for trading on the New York
Stock Exchange concurrently with the consummation of the Merger, and, therefore,
would be freely  tradable  at the option of the former  Limited  Partners.  At a
special meeting of the partners that is expected to be held in the third quarter
of  1999,  Limited  Partners  holding  in  excess  of 50%  of the  Partnership's
outstanding  limited  partnership  interests  must  approve the Merger  prior to
consummation of the  transaction.  The General Partners intend to recommend that
the Limited Partners of the Partnership  approve the Merger.  In connection with
their  recommendation,  the  General  Partners  will  solicit the consent of the
Limited Partners at the special meeting.

Results of Operations

         During  1996 and  1997,  the  Partnership  and its  consolidated  joint
venture,  Woodway Joint  Venture,  owned and leased 29  wholly-owned  Properties
(including one Property in Orlando, Florida, which was sold in October 1996) and
during 1998, the Partnership and its consolidated  joint venture,  Woodway Joint
Venture, owned and leased 28 wholly-owned Properties.  In addition, during 1996,
1997, and 1998, the  Partnership  was a co-venturer in three joint ventures that
owned and leased a total of eight  Properties.  As of  December  31,  1998,  the
Partnership  owned,  either directly or through joint venture  arrangements,  36
Properties which are subject to long-term,  triple-net leases. The leases of the
Properties  provide for minimum base annual rental  amounts  (payable in monthly
installments) ranging from approximately $41,300 to $213,800.  All of the leases
provide for percentage rent based on sales in excess of a specified  amount.  In
addition,  a majority of the leases provide that,  commencing in specified lease
years  (ranging  from the  third to sixth  lease  year),  the  annual  base rent
required under the terms of the lease will increase.  For further description of
the Partnership's leases and Properties,  see Item 1. Business - Leases and Item
2. Properties, respectively.

         During  the  years  ended  December  31,  1998,  1997,  and  1996,  the
Partnership and its consolidated  joint venture,  Woodway Joint Venture,  earned
$2,991,048,  $3,015,642,  and  $3,182,058,  respectively,  in rental income from
operating leases and earned income from direct financing leases. The decrease in
rental and earned  income for 1998, as compared to 1997, is primarily due to the
fact that the leases  relating  to the Burger  King  Properties  in New City and
Syracuse,  New York and New  Philadelphia  and  Mansfield,  Ohio were amended to
provide for rent reductions from August 1998 through the end of the lease terms.
The decrease in rental and earned  income  during 1997,  as compared to 1996, is
primarily  attributable  to the sale of the  Property  in Orlando,  Florida,  in
October 1996, as described above in "Liquidity and Capital Resources."

         For the years ended December 31, 1998,  1997, and 1996, the Partnership
also earned $101,911, $85,735, and $31,712,  respectively,  in contingent rental
income.  The increase in contingent rental income for 1998, as compared to 1997,
is primarily  attributable to an increase in gross sales for certain  restaurant
Properties  requiring the payment of contingent  rental income.  The increase in
contingent  rental  income  during  1997  as  compared  to  1996,  is  primarily
attributable  to (i)  the  Partnership  adjusting  estimated  contingent  rental
amounts  accrued at December 31, 1996, to actual  amounts  during the year ended
December  31,  1997,  and  (ii)  increased  gross  sales of  certain  restaurant
Properties requiring the payment of contingent rental income.

         During  the  years  ended  December  31,  1998,  1997,  and  1996,  the
Partnership  also earned  $269,744,  $238,338,  and $127,246,  respectively,  in
interest and other income. The increase in interest and other income during 1997
as compared to 1996,  is primarily  attributable  to the interest  earned on the
mortgage notes accepted in connection with the sale of the one Property  located
in  Orlando,  Florida,  in  October  1996  and the  two  Properties  located  in
Jacksonville, Florida, in December 1995.

         For the years ended December 31, 1998,  1997, and 1996, the Partnership
also earned $276,721, $293,480, and $266,500, respectively,  attributable to net
income earned by  unconsolidated  joint  ventures in which the  Partnership is a
co-venturer.  The decrease in net income by joint ventures for 1998, as compared
to 1997, is primarily due to the fact that the lease relating to the Burger King
Property in Asheville,  North Carolina of Asheville Joint Venture was amended to
provide for rent  reductions from August 1998 through the end of the lease term.
The increase in net income earned by joint  ventures  during 1997 as compared to
1996, is primarily  attributable  to the fact that the  Partnership  invested in
Middleburg  Joint  Venture in May 1996,  as described  above in  "Liquidity  and
Capital Resources."

         During  the  year  ended  December  31,  1998,  three  lessees  of  the
Partnership  and its  consolidated  joint  venture,  Golden Corral  Corporation,
Carrols Corporation and Restaurant  Management Services,  Inc., each contributed
more than ten percent of the Partnership's total rental income (including rental
income from the Partnership's  consolidated  joint venture and the Partnership's
share of rental income from eight  Properties  owned by joint  ventures).  As of
December  31,  1998,  Golden  Corral  Corporation  was the lessee  under  leases
relating to four  restaurants,  Carrols  Corporation was the lessee under leases
relating to five restaurants and, Restaurant  Management Services,  Inc. was the
lessee under leases relating to five restaurants.  It is anticipated that, based
on the minimum  annual  rental  payments  required  by the  leases,  these three
lessees will continue to contribute  more than ten percent of the  Partnership's
total rental income during 1999. In addition, during the year ended December 31,
1998,  three Restaurant  Chains,  Golden Corral Family  Steakhouse  Restaurants,
Burger  King and  Shoney's,  each  accounted  for more than ten  percent  of the
Partnership's   total  rental   income   (including   rental   income  from  the
Partnership's  consolidated joint venture and the Partnership's  share of rental
income from eight Properties owned by unconsolidated  joint ventures).  In 1999,
it is  anticipated  that these three  Restaurant  Chains  each will  continue to
account for more than ten percent of the  Partnership's  total rental  income to
which the Partnership is entitled under the terms of the leases.  Any failure of
these lessees or Restaurant  Chains could  materially  affect the  Partnership's
income if the  Partnership  is not able to  re-lease  the  Property  in a timely
manner.

         Operating expenses,  including  depreciation and amortization  expense,
were  $445,170,  $377,922,  and $397,587 for the years ended  December 31, 1998,
1997, and 1996, respectively. The increase in operating expenses during 1998, as
compared  to 1997,  is  partially  due to an increase  in  depreciation  expense
relating to the fact that during 1998, the Partnership  reclassified  the leases
for its Properties in New City and Syracuse,  New York and New  Philadelphia and
Mansfield,  Ohio from direct  financing  leases to operating leases due to lease
amendments.

         The increase in operating  expenses for 1998, is also  partially due to
the fact that the Partnership  incurred $21,042 in transaction  costs related to
the General  Partners  retaining  financial and legal advisors to assist them in
evaluating  and  negotiating  the  proposed  Merger  with APF, as  described  in
"Liquidity and Capital  Resources." If the Limited  Partners  reject the Merger,
the Partnership  will bear the portion of the  transaction  costs based upon the
percentage of "For" votes and the General Partners will bear the portion of such
transaction costs based upon the percentage of "Against" votes and abstentions.

         The decrease in operating expenses during 1997, as compared to 1996, is
primarily  attributable to a decrease in accounting and administrative  expenses
associated with operating the Partnership and its Properties.

         As a  result  of the  right  of way  settlement  for the  Partnership's
Property in Brooksville,  Florida,  as described above in "Liquidity and Capital
Resources," the Partnership recognized a gain on sale of land of $108,176 during
the year ended December 31, 1998, for financial reporting purposes.  As a result
of the 1996 sale of the  Property in Orlando,  Florida,  as  described  above in
"Liquidity and Capital Resources," the Partnership  recognized a loss of $99,031
for the year ended December 31, 1996. No Properties were sold during 1997.

         The Partnership's leases as of December 31, 1998, are triple-net leases
and contain  provisions that the General  Partners  believe mitigate the adverse
effect of inflation.  Such provisions  include clauses  requiring the payment of
percentage rent based on certain restaurant sales above a specified level and/or
automatic  increases  in base rent at  specified  times  during  the term of the
lease.  Management  expects  that  increases in  restaurant  sales volume due to
inflation  and real sales growth  should  result in an increase in rental income
over  time.  Continued  inflation  also may cause  capital  appreciation  of the
Partnership's Properties.  Inflation and changing prices, however, also may have
an  adverse  impact on the sales of the  restaurants  and on  potential  capital
appreciation of the Properties.

Year 2000

         The Year 2000 problem is the result of information  technology  systems
and embedded  systems  (products which are made with  microprocessor  (computer)
chips such as HVAC systems,  physical  security  systems and elevators)  using a
two-digit  format,  as  opposed  to four  digits,  to  indicate  the year.  Such
information  technology and embedded systems may be unable to properly recognize
and process date-sensitive information beginning January 1, 2000.

         The  Partnership  currently  does not have any  information  technology
systems.  Affiliates of the General Partners provide all services  requiring the
use of information  technology  systems pursuant to a management  agreement with
the  Partnership.   The  maintenance  of  embedded  systems,   if  any,  at  the
Partnership's  Properties is the responsibility of the tenants of the Properties
in accordance with the terms of the Partnership's  leases.  The General Partners
and  affiliates  have  established  a team  dedicated to reviewing  the internal
information technology systems used in the operation of the Partnership, and the
information  technology and embedded  systems and the Year 2000 compliance plans
of the Partnership's tenants, significant suppliers,  financial institutions and
transfer agent.

         The  information  technology  infrastructure  of the  affiliates of the
General  Partners  consists of a network of personal  computers and servers that
were  obtained   from  major   suppliers.   The   affiliates   utilize   various
administrative  and financial  software  applications on that  infrastructure to
perform the business functions of the Partnership.  The inability of the General
Partners  and  affiliates  to identify  and timely  correct  material  Year 2000
deficiencies  in  the  software  and/or   infrastructure   could  result  in  an
interruption in, or failure of, certain of the Partnership's business activities
or operations.  Accordingly,  the General Partners and affiliates have requested
and  are  evaluating  documentation  from  the  suppliers  of the  software  and
infrastructure  of the  affiliates  regarding the Year 2000  compliance of their
products  that  are  used  in  the  business  activities  or  operations  of the
Partnership.   The  General  Partners  and  affiliates  have  not  yet  received
sufficient certifications to be assured that the suppliers have


<PAGE>


fully  considered and mitigated any potential  material  impact of the Year 2000
deficiencies.  The costs  expected to be incurred  by the General  Partners  and
affiliates  to become  Year  2000  compliant  will be  incurred  by the  General
Partners  and  affiliates;  therefore,  these  costs  will have no impact on the
Partnership's financial position or results of operations.

         The  Partnership  has  material  third  party  relationships  with  its
tenants,  financial  institutions and transfer agent. The Partnership depends on
its  tenants  for  rents  and  cash  flows,   its  financial   institutions  for
availability  of cash and its  transfer  agent to  maintain  and track  investor
information.  If any of these third parties are unable to meet their obligations
to the  Partnership  because of the Year 2000  deficiencies,  such a failure may
have a material impact on the  Partnership.  Accordingly,  the General  Partners
have requested and are evaluating  documentation from the Partnership's tenants,
financial  institutions,   and  transfer  agent  relating  to  their  Year  2000
compliance  plans.  The  General  Partners  have  not  yet  received  sufficient
certifications  to be assured  that the  tenants,  financial  institutions,  and
transfer agent have fully considered and mitigated any potential material impact
of the Year 2000 deficiencies.  Therefore,  the General Partners do not, at this
time,  know of the potential  costs to the  Partnership of any adverse impact or
effect of any Year 2000 deficiencies by these third parties.

         The General  Partners  currently  expect that all year 2000  compliance
testing  and any  necessary  remedial  measures  on the  information  technology
systems used in the business  activities and operations of the Partnership  will
be completed prior to June 30, 1999.  Based on the progress the General Partners
and affiliates  have made in identifying and addressing the  Partnership's  Year
2000 issues and the plan and timeline to complete the  compliance  program,  the
General  Partners  do  not  foresee   significant   risks  associated  with  the
Partnership's  Year 2000 compliance at this time.  Because the General  Partners
and affiliates are still  evaluating  the status of the  information  technology
systems used in business  activities and operations of the  Partnership  and the
systems of the third parties with which the  Partnership  conducts its business,
the General Partners have not yet developed a comprehensive contingency plan and
are unable to identify "the most reasonably  likely worst case scenario" at this
time.  If  the  General  Partners  identify  significant  risks  related  to the
Partnership's  Year 2000 compliance or if the Partnership's Year 2000 compliance
program's  progress deviates  substantially from the anticipated  timeline,  the
General Partners will develop appropriate contingency plans.

Interest Rate Risk

         The  Partnership  has provided  fixed rate mortgage notes to borrowers.
The General Partners believe that the estimated fair value of the mortgage notes
at  December  31, 1998  approximated  the  outstanding  principal  amounts.  The
Partnership is exposed to equity loss in the event of changes in interest rates.
The  following  table  presents  the expected  cash flows of principal  that are
sensitive to these changes.

                                                              Mortgage notes
                                                                Fixed Rates
                                                             ------------------

                    1999                                             $  47,552
                    2000                                                61,451
                    2001                                                68,361
                    2002                                                76,049
                    2003                                                84,601
                    Thereafter                                       1,457,906
                                                             ------------------

                                                                   $ 1,795,920
                                                             ==================


Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

         This information is described above in Item 7. Management's  Discussion
and Analysis of Financial  Condition  and Results of Operations -- Interest Rate
Risk.


Item 8.   Financial Statements and Supplementary Data


<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                                    CONTENTS







                                                      Page

Report of Independent Accountants                      

Financial Statements:

  Balance Sheets                                       

  Statements of Income                                 

  Statements of Partners' Capital                      

  Statements of Cash Flows                             

  Notes to Financial Statements                        


<PAGE>






                        Report of Independent Accountants



To the Partners
CNL Income Fund VIII, Ltd.



In our opinion,  the financial  statements  listed in the index  appearing under
item 14(a)(1) present fairly, in all material  respects,  the financial position
of CNL Income Fund VIII,  Ltd. (a Florida  limited  partnership) at December 31,
1998 and 1997,  and the results of its operations and its cash flows for each of
the three  years in the  period  ended  December  31,  1998 in  conformity  with
generally  accepted  accounting  principles.  In addition,  in our opinion,  the
financial  statement schedules listed in the index appearing under item 14(a)(2)
present fairly, in all material respects, the information set forth therein when
read in  conjunction  with the related  financial  statements.  These  financial
statements  and  financial  statement  schedules are the  responsibility  of the
Partnership's  management;  our responsibility is to express an opinion on these
financial  statements and financial  statement schedules based on our audits. We
conducted our audits of these  statements in accordance with generally  accepted
auditing  standards  which  require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.






Orlando, Florida
February 4, 1999, except for Note 11 for which the date is March 11, 1999


<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                                 BALANCE SHEETS
<TABLE>
<CAPTION>


                                                                                           December 31,
                                                                                   1998                     1997
                                                                             -----------------         ----------------
<S> <C>

                         ASSETS

Land and buildings on operating leases, less
    accumulated depreciation                                                      $15,769,278              $13,960,232
Net investment in direct financing leases                                           7,802,785               10,044,975
Investment in joint ventures                                                        2,809,759                2,877,717
Mortgage notes receivable                                                           1,811,726                1,853,386
Cash and cash equivalents                                                           1,809,258                1,602,236
Receivables, less allowance for doubtful
    accounts of $24,636 and $19,228                                                    84,265                   51,393
Prepaid expenses                                                                        3,959                    4,357
Accrued rental income, less allowance for
    doubtful accounts of $4,501 in 1998 and                                         1,927,418                1,811,329
    1997
Other assets                                                                           52,671                   52,671
                                                                             -----------------         ----------------

                                                                                  $32,071,119              $32,258,296
                                                                             =================         ================


                     LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                                                                    $   4,258                $   8,359
Escrowed real estate taxes payable                                                     27,838                   24,459
Distributions payable                                                               1,137,501                  787,501
Due to related parties                                                                 75,266                   59,649
Rents paid in advance and deposits                                                     62,349                   53,556
                                                                             -----------------         ----------------
    Total liabilities                                                               1,307,212                  933,524

Minority interest                                                                     108,600                  108,374

Partners' capital                                                                  30,655,307               31,216,398
                                                                             -----------------         ----------------

                                                                                  $32,071,119              $32,258,296
                                                                             =================         ================

</TABLE>

                 See accompanying notes to financial statements.


<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                              STATEMENTS OF INCOME
<TABLE>
<CAPTION>


                                                                               Year Ended December 31,
                                                                 1998                1997                  1996
                                                            --------------       --------------       --------------
<S> <C>
Revenues:
    Rental income from operating leases                      $  1,897,209         $  1,804,273         $  1,867,968
    Earned income from direct financing leases                  1,093,839            1,211,369            1,314,090
    Contingent rental income                                      101,911               85,735               31,712
    Interest and other income                                     269,744              238,338              127,246
                                                            --------------       --------------       --------------
                                                                3,362,703            3,339,715            3,341,016
                                                            --------------       --------------       --------------
Expenses:
    General operating and administrative                          146,943              140,586              156,177
    Professional services                                          24,837               23,284               27,682
    State and other taxes                                           5,372                5,081                4,757
    Depreciation                                                  246,976              208,971              208,971
    Transaction costs                                              21,042                   --                   --
                                                            --------------       --------------       --------------
                                                                  445,170              377,922              397,587
                                                            --------------       --------------       --------------

Income Before Minority Interest in Income of
    Consolidated Joint Venture, Equity in
    Earnings of Unconsolidated Joint Ventures
    and Gain (Loss) on Sale of Land and
    Buildings                                                   2,917,533            2,961,793            2,943,429

Minority  Interest in Income of  Consolidated
    Joint Venture                                                 (13,518 )            (13,706 )           (13,906)

Equity in Earnings of Unconsolidated Joint
    Ventures                                                      276,721             293 ,480              266,500

Gain (Loss) on Sale of Land and Buildings                         108,176                   --             (99,031)
                                                            --------------       --------------       --------------

Net Income                                                   $  3,288,912         $  3,241,567         $  3,096,992
                                                            ==============       ==============       ==============

Allocation of Net Income:
    General partners                                          $    31,807          $    32,416          $    31,413
    Limited partners                                            3,257,105            3,209,151            3,065,579
                                                            --------------       --------------       --------------

                                                             $  3,288,912         $  3,241,567         $  3,096,992
                                                            ==============       ==============       ==============

Net Income Per Limited Partner Unit                            $    0.093           $    0.092           $    0.088
                                                            ==============       ==============       ==============

Weighted Average Number of
    Limited Partner Units Outstanding                          35,000,000           35,000,000           35,000,000
                                                            ==============       ==============       ==============


</TABLE>






                 See accompanying notes to financial statements.


<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                         STATEMENTS OF PARTNERS' CAPITAL

                  Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>


                                   General Partners                            Limited Partners
                              ---------------------------  ----------------------------------------------------------
                                             Accumulated                                   Accumulated    Syndication
                              Contributions    Earnings    Contributions   Distributions    Earnings         Costs        Total
                              -------------  ------------  -------------   -------------   ------------   ------------  -----------
<S> <C>
Balance, December 31, 1995    $     1,000    $   161,612   $ 35,000,000    $ (15,772,138 )  $ 16,064,868  $ (4,015,000) $31,440,342

    Distributions to limited
       partners ($0.098 per
       limited partner unit)           --             --             --       (3,412,500 )            --            --   (3,412,500)
    Net income                         --         31,413             --               --       3,065,579            --    3,096,992
                              ------------   ------------  -------------   --------------   ------------- ------------- ------------

Balance, December 31, 1996          1,000        193,025     35,000,000      (19,184,638 )    19,130,447    (4,015,000)  31,124,834

    Distributions to limited
       partners ($0.090 per
       limited partner unit)           --             --             --       (3,150,003 )            --            --   (3,150,003)
    Net income                         --         32,416             --               --       3,209,151            --    3,241,567
                              ------------   ------------  -------------   --------------   ------------- ------------- ------------

Balance, December 31, 1997          1,000        225,441     35,000,000      (22,334,641 )    22,339,598    (4,015,000)  31,216,398

    Distributions to limited
       partners ($0.110 per
       limited partner unit)           --             --             --       (3,850,003 )            --            --   (3,850,003)
    Net income                         --         31,807             --               --       3,257,105            --    3,288,912
                              ------------   ------------  -------------   --------------   ------------- ------------- ------------

Balance, December 31, 1998    $     1,000    $   257,248   $ 35,000,000    $ (26,184,644 )  $ 25,596,703  $ (4,015,000) $30,655,307
                              ============   ============  =============   ==============   ============= ============= ============
</TABLE>

                 See accompanying notes to financial statements.


<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                         Year Ended December 31,
                                                                 1998                  1997                  1996
                                                            ---------------       ----------------      ----------------
<S> <C>
Increase (Decrease) in Cash and Cash
   Equivalents:

      Cash Flows from Operating Activities:
         Cash received from tenants                           $  3,144,635          $  3,114,439           $ 3,222,903
         Distributions from unconsolidated
             joint ventures                                        344,643               356,589               323,531
         Cash paid for expenses                                   (185,270 )            (163,215  )           (194,218  )
         Interest received                                         258,584               235,243               110,452
                                                            ---------------       ----------------      ----------------
             Net cash provided by operating activities           3,562,592             3,543,056             3,462,668
                                                            ---------------       ----------------      ----------------

      Cash Flows from Investing Activities:
         Proceeds from sale of land and buildings                  116,397                    --                    --
         Additions to land and buildings on operating
             leases                                                     --                    --                (1,135  )
         Investment in direct financing leases                          --                    --                (1,326  )
         Investment in joint venture                                    --                    --              (234,059  )
         Collections on mortgage notes receivable                   41,292                 8,799                 2,557
         Other                                                          36                    --               (34,793  )
                                                            ---------------       ----------------      ----------------
             Net cash provided by (used in) investing
                activities                                         157,725                 8,799              (268,756  )
                                                            ---------------       ----------------      ----------------

      Cash Flows from Financing Activities:
         Distributions to limited partners                      (3,500,003 )          (3,412,502  )         (3,325,000  )
         Distributions to holder of minority interest              (13,292 )             (13,391  )            (13,503  )
                                                            ---------------       ----------------      ----------------
             Net cash used in financing activities              (3,513,295 )          (3,425,893  )         (3,338,503  )
                                                            ---------------       ----------------      ----------------

Net Increase (Decrease) in Cash and Cash Equivalents               207,022               125,962              (144,591  )

Cash and Cash Equivalents at Beginning of Year                   1,602,236             1,476,274             1,620,865
                                                            ---------------       ----------------      ----------------

Cash and Cash Equivalents at End of Year                      $  1,809,258          $  1,602,236           $ 1,476,274
                                                            ===============       ================      ================
</TABLE>

                 See accompanying notes to financial statements.


<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                      STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>

                                                                               Year Ended December 31,
                                                                   1998                  1997               1996
                                                               ---------------      ---------------    ----------------
<S> <C>
Reconciliation of Net Income to Net Cash
   Provided by Operating Activities:

      Net income                                                 $ 3,288,912          $  3,241,567        $  3,096,992
                                                               ---------------      ---------------    ----------------
      Adjustments to  reconcile  net income
         to net cash  provided  by  operating
         activities:
             Depreciation                                            246,976               208,971             208,971
             Minority interest in income of consolidated
                joint venture                                         13,518                13,706              13,906
             Equity in earnings of unconsolidated
                joint ventures, net of distributions                  67,922                63,109              57,031
             Loss (gain) on sale of land and buildings              (108,176  )                 --              99,031
             Decrease (increase) in receivables                      (32,504  )            (25,641 )               429
             Decrease (increase) in prepaid expenses                     398                    20              (1,465 )
             Decrease in net investment in direct
                financing leases                                     177,947               178,250             157,194
             Increase in accrued rental income                      (116,089  )           (128,736 )          (219,757 )
             Increase (decrease) in accounts
                payable and accrued expenses                            (722  )              9,987              12,203
             Increase (decrease) in due to related parties            15,617                 2,769              (4,505 )
             Increase (decrease) in rents paid in advance
                and deposits                                           8,793               (20,946 )            42,638
                                                               ---------------      ---------------    ----------------
                   Total adjustments                                 273,680               301,489             365,676
                                                               ---------------      ---------------    ----------------

Net Cash Provided by Operating Activities                        $ 3,562,592          $  3,543,056        $  3,462,668
                                                               ===============      ===============    ================

Supplemental Schedule of Non-Cash Investing and
   Financing Activities:

      Mortgage notes accepted in exchange for
         sale of land and buildings                                  $    --              $     --        $  1,375,000
                                                               ===============      ===============    ================

      Distributions declared and unpaid at December 31           $ 1,137,501           $   787,501        $  1,050,000
                                                               ===============      ===============    ================

</TABLE>








                 See accompanying notes to financial statements.


<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS

                  Years Ended December 31, 1998, 1997, and 1996


1.       Significant Accounting Policies:

         Organization  and Nature of Business - CNL Income Fund VIII,  Ltd. (the
         "Partnership") is a Florida limited  partnership that was organized for
         the purpose of acquiring both newly constructed and existing restaurant
         properties,  as well as properties  upon which  restaurants  were to be
         constructed,  which are leased  primarily  to operators of national and
         regional fast-food and family-style restaurant chains.

         The general partners of the Partnership are CNL Realty Corporation (the
         "Corporate  General  Partner"),  James M.  Seneff,  Jr.  and  Robert A.
         Bourne.  Mr. Seneff and Mr. Bourne are also 50 percent  shareholders of
         the Corporate General Partner. The general partners have responsibility
         for managing the day-to-day operations of the Partnership.

         Real  Estate  and  Lease  Accounting  -  The  Partnership  records  the
         acquisition of land and buildings at cost,  including  acquisition  and
         closing costs. Land and buildings are leased to unrelated third parties
         on a triple-net basis, whereby the tenant is generally  responsible for
         all operating  expenses  relating to the property,  including  property
         taxes, insurance, maintenance and repairs. The leases are accounted for
         using either the direct financing or the operating method. Such methods
         are described below:

                  Direct  financing  method - The leases accounted for using the
                  direct  financing  method are recorded at their net investment
                  (which at the inception of the lease generally  represents the
                  cost of the asset) (Note 4).  Unearned  income is deferred and
                  amortized  to income  over the lease  terms so as to produce a
                  constant   periodic  rate  of  return  on  the   Partnership's
                  investment in the leases.

                  Operating  method - Land and  building  leases  accounted  for
                  using the  operating  method are recorded at cost,  revenue is
                  recognized as rentals are earned and  depreciation  is charged
                  to operations as incurred.  Buildings are  depreciated  on the
                  straight-line  method over their estimated  useful lives of 30
                  years.  When  scheduled  rentals  vary  during the lease term,
                  income is recognized on a straight-line basis so as to produce
                  a constant periodic rent over the lease term commencing on the
                  date the property is placed in service.




<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


1.       Significant Accounting Policies - Continued:

                  Accrued  rental  income  represents  the  aggregate  amount of
                  income  recognized  on a  straight-line  basis  in  excess  of
                  scheduled rental payments to date.  Whenever a tenant defaults
                  under  the  terms  of its  lease,  or  events  or  changes  in
                  circumstance  indicate  that the  tenant  will not  lease  the
                  property  through the end of the lease term,  the  Partnership
                  either  reserves or writes-off the  cumulative  accrued rental
                  income balance.

         When  the  properties  are  sold,  the  related  cost  and  accumulated
         depreciation  for operating  leases and the net  investment  for direct
         financing leases,  plus any accrued rental income, are removed from the
         accounts and gains or losses from sales are  reflected  in income.  The
         general   partners  of  the  Partnership   review  the  properties  for
         impairment  whenever events or changes in  circumstances  indicate that
         the  carrying  amount  of the  assets  may not be  recoverable  through
         operations.  The general  partners  determine  whether an impairment in
         value has occurred by comparing the estimated future  undiscounted cash
         flows, including the residual value of the property,  with the carrying
         cost of the  individual  property.  If an impairment is indicated,  the
         assets are adjusted to their fair value.  Although the general partners
         have  made  their  best  estimate  of these  factors  based on  current
         conditions,  it is reasonably  possible that changes could occur in the
         near term which could adversely affect the general  partners'  estimate
         of net cash flows  expected to be generated from its properties and the
         need for asset impairment write-downs.

         When the  collection  of amounts  recorded as rental or other income is
         considered  to be  doubtful,  an  adjustment  is made to  increase  the
         allowance for doubtful accounts,  which is netted against  receivables,
         and to decrease rental or other income or increase bad debt expense for
         the  current  period,  although  the  Partnership  continues  to pursue
         collection of such amounts.  If amounts are subsequently  determined to
         be uncollectible,  the  corresponding  receivable and the allowance for
         doubtful accounts are decreased accordingly.

         Investment in Joint Ventures - The Partnership  accounts for its 87.68%
         interest  in Woodway  Joint  Venture  using the  consolidation  method.
         Minority  interest  represents  the minority  joint  venture  partner's
         proportionate  share of the  equity in the  Partnership's  consolidated
         joint venture. All significant  intercompany  accounts and transactions
         have been eliminated.

         The   Partnership's   investments  in  Asheville  Joint  Venture,   CNL
         Restaurant  Investments II and  Middleburg  Joint Venture are accounted
         for using the equity method since the  Partnership  shares control with
         affiliates which have the same general partners.



<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


1.       Significant Accounting Policies - Continued:

         Cash and Cash Equivalents - The Partnership considers all highly liquid
         investments  with a maturity of three months or less when  purchased to
         be cash  equivalents.  Cash  and cash  equivalents  consist  of  demand
         deposits at commercial  banks and money market funds (some of which are
         backed by government  securities).  Cash equivalents are stated at cost
         plus accrued interest, which approximates market value.

         Cash  accounts  maintained  on  behalf  of the  Partnership  in  demand
         deposits  at  commercial  banks  and  money  market  funds  may  exceed
         federally insured levels;  however, the Partnership has not experienced
         any losses in such  accounts.  The  Partnership  limits  investment  of
         temporary cash investments to financial  institutions  with high credit
         standing;  therefore, the Partnership believes it is not exposed to any
         significant credit risk on cash and cash equivalents.

         Income Taxes - Under  Section 701 of the  Internal  Revenue  Code,  all
         income,  expenses and tax credit items flow through to the partners for
         tax  purposes.  Therefore,  no  provision  for federal  income taxes is
         provided in the accompanying  financial statements.  The Partnership is
         subject to certain state taxes on its income and property.

         Additionally,  for tax  purposes,  syndication  costs are  included  in
         Partnership equity and in the basis of each partner's  investment.  For
         financial  reporting  purposes,  syndication  costs are netted  against
         partners' capital and represent a reduction of Partnership equity and a
         reduction in the basis of each partner's investment.

         Use of Estimates - The general  partners of the Partnership have made a
         number of estimates and assumptions relating to the reporting of assets
         and liabilities and the disclosure of contingent assets and liabilities
         to prepare these  financial  statements in  conformity  with  generally
         accepted  accounting  principles.  The more significant areas requiring
         the use of  management  estimates  relate to the allowance for doubtful
         accounts  and future  cash flows  associated  with  long-lived  assets.
         Actual results could differ from those estimates.



<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


2.       Leases:

         The Partnership leases its land and buildings primarily to operators of
         national and  regional  fast-food  and  family-style  restaurants.  The
         leases are accounted for under the provisions of Statement of Financial
         Accounting  Standards  No. 13,  "Accounting  for  Leases."  Some of the
         leases have been classified as operating  leases and some of the leases
         have been classified as direct  financing  leases.  For property leases
         classified as direct  financing  leases,  the building  portions of the
         majority  of  property  leases are  accounted  for as direct  financing
         leases  while the land  portions of these leases are  accounted  for as
         operating  leases.  Substantially all leases are for 15 to 20 years and
         provide for minimum and  contingent  rentals.  In addition,  the tenant
         pays all property taxes and  assessments,  fully maintains the interior
         and exterior of the building and carries insurance  coverage for public
         liability,  property  damage,  fire and  extended  coverage.  The lease
         options  generally  allow  tenants  to renew the leases for two to four
         successive  five-year  periods subject to the same terms and conditions
         of the initial lease. Most leases also allow the tenant to purchase the
         property  at fair market  value after a specified  portion of the lease
         has elapsed.

3.       Land and Buildings on Operating Leases:

         Land and  buildings on operating  leases  consisted of the following at
         December 31:
<TABLE>
<CAPTION>

                                                                    1998                  1997
                                                              -----------------     -----------------
<S> <C>
                  Land                                             $ 9,159,115           $ 9,167,336
                  Buildings                                          8,295,673             6,231,430
                                                              -----------------     -----------------
                                                                    17,454,788            15,398,766

                  Less accumulated depreciation                     (1,685,510 )          (1,438,534 )
                                                              -----------------     -----------------

                                                                   $15,769,278           $13,960,232
                                                              =================     =================
</TABLE>



<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


3.       Land and Buildings on Operating Leases - Continued:

         In July 1998, the  Partnership  received  $116,397 as a settlement from
         the  Florida  Department  of  Transportation  for a right of way taking
         related to a parcel of land on its property in Brooksville, Florida. In
         connection therewith, the Partnership recognized a gain of $108,176 for
         financial reporting purposes.

         Some leases provide for escalating  guaranteed minimum rents throughout
         the  lease  terms.  Income  from  these  scheduled  rent  increases  is
         recognized on a straight-line  basis over the terms of the leases.  For
         the years ended  December 31, 1998,  1997,  and 1996,  the  Partnership
         recognized $116,089,  $128,736 (net $4,501 in reserves),  and $219,757,
         respectively, of such rental income.

         The following is a schedule of the future  minimum lease payments to be
         received on noncancellable operating leases at December 31, 1998:

                1999                               $1,889,012
                2000                                1,919,651
                2001                                2,017,044
                2002                                2,065,510
                2003                                2,096,121
                Thereafter                         12,027,545
                                             -----------------

                                                  $22,014,883
                                             =================

         Since  lease  renewal  periods  are  exercisable  at the  option of the
         tenant, the above table only presents future minimum lease payments due
         during  the  initial  lease  terms.  In  addition,  this table does not
         include any amounts for future contingent rentals which may be received
         on the leases based on a percentage of the tenant's gross sales.


<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


4.       Net Investment in Direct Financing Leases:

         The  following  lists the  components  of the net  investment in direct
         financing leases at December 31:
<TABLE>
<CAPTION>

                                                                    1998                  1997
                                                              -----------------     -----------------
<S> <C>
                  Minimum lease payments
                       receivable                                  $14,095,756           $18,939,788
                  Estimated residual values                          2,457,619             3,040,615
                  Less unearned income                              (8,750,590 )         (11,935,428 )
                                                              -----------------     -----------------

                  Net investment in direct
                       financing leases                             $7,802,785           $10,044,975
                                                              =================     =================
</TABLE>

         In August 1998,  four of the  Partnership's  leases were amended.  As a
         result, the Partnership reclassified these leases from direct financing
         leases  to  operating  leases.  In  accordance  with the  Statement  of
         Financial  Accounting  Standards  #13,  "Accounting  for  Leases,"  the
         Partnership  recorded each of the  reclassified  leases at the lower of
         original cost, present fair value, or present carrying value. No losses
         on the  termination  of  direct  financing  leases  were  recorded  for
         financial reporting purposes.

         The  following  is a schedule of future  minimum  lease  payments to be
         received on direct financing leases at December 31, 1998:

                1999                               $1,106,822
                2000                                1,106,822
                2001                                1,130,328
                2002                                1,142,042
                2003                                1,142,042
                Thereafter                          8,467,700
                                             -----------------

                                                  $14,095,756
                                             =================

         The above table does not include  future  minimum  lease  payments  for
         renewal  periods or for contingent  rental payments that may become due
         in future periods (see Note 3).



<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


5.       Investment in Joint Ventures:

         The  Partnership has an 85.54%,  a 36.8%,  and a 12.46% interest in the
         profits  and  losses  of  Asheville   Joint  Venture,   CNL  Restaurant
         Investments  II,  and  Middleburg  Joint  Venture,   respectively.  The
         remaining  interests in these joint  ventures are held by affiliates of
         the Partnership which have the same general partners.

         Asheville Joint Venture and Middleburg Joint Venture each own and lease
         one property,  and CNL  Restaurant  Investments  II owns and leases six
         properties  to  an  operator  of  national  fast-food  or  family-style
         restaurants.  The  following  presents  the joint  ventures'  combined,
         condensed financial information at December 31:
<TABLE>
<CAPTION>

                                                                               1998                  1997
                                                                          ---------------      -----------------
<S> <C>
                Land and buildings on operating
                    leases, less accumulated
                    depreciation                                              $6,320,059             $6,487,210
                Net investment in direct financing lease                       1,319,045              1,335,223
                Cash                                                               1,176                    596
                Receivables                                                       17,395                 14,169
                Prepaid expenses                                                     719                  1,017
                Accrued rental income                                            162,857                128,993
                Liabilities                                                          580                    864
                Partners' capital                                              7,820,671              7,966,344
                Revenues                                                         940,168              1,001,284
                Net income                                                       762,579                824,576
</TABLE>

         The Partnership  recognized income totalling  $276,721,  $293,480,  and
         $266,500  for the  years  ended  December  31,  1998,  1997,  and 1996,
         respectively, from these joint ventures.

6.       Mortgage Notes Receivable:

         As of December 31, 1995,  the  Partnership  had accepted two promissory
         notes in the principal sum totalling  $460,000,  in connection with the
         sale of two of its properties in Jacksonville,  Florida. The promissory
         notes,  which are  collateralized by mortgages on the properties,  bear
         interest at a rate of ten percent per annum, and are being collected in
         119 equal  monthly  installments  of $2,106 and  $1,931,  with  balloon
         payments of $218,252 and $200,324, respectively, due in December 2005.


<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


6.       Mortgage Notes Receivable - Continued:

         In  addition,  in  connection  with the sale in 1996 of its property in
         Orlando,  Florida,  the  Partnership  accepted a promissory note in the
         principal  sum of  $1,388,568,  representing  the gross  sales price of
         $1,375,000  plus tenant  closing costs of $13,568 that the  Partnership
         financed on behalf of the tenant. The promissory note bears interest at
         a rate of 10.75%  per annum,  is  collateralized  by a mortgage  on the
         property and is being collected in 12 monthly  installments of interest
         only, in 24 monthly installments of $15,413 consisting of principal and
         interest,  and  thereafter  in  144  monthly  installments  of  $16,220
         consisting of principal and interest.

         The mortgage  notes  receivable  consisted of the following at December
         31:
<TABLE>
<CAPTION>

                                                      1998                 1997
                                                 ---------------      ----------------
<S> <C>
                Principal balance                    $1,795,920            $1,837,212
                Accrued interest receivable              15,806                16,174
                                                 ---------------      ----------------

                                                     $1,811,726            $1,853,386
                                                 ===============      ================
</TABLE>

         The general  partners believe that the estimated fair value of mortgage
         notes  receivable  at  December  31,  1998 and 1997,  approximated  the
         outstanding  principal amount based on estimated current rates at which
         similar  loans would be made to borrowers  with similar  credit and for
         similar maturities.

7.       Allocations and Distributions:

         Generally, all net income and net losses of the Partnership,  excluding
         gains and losses from the sale of properties,  are allocated 99 percent
         to the  limited  partners  and one  percent  to the  general  partners.
         Distributions  of net  cash  flow are made 99  percent  to the  limited
         partners and one percent to the general  partners;  provided,  however,
         that the one percent of net cash flow to be  distributed to the general
         partners  is  subordinated  to receipt by the  limited  partners  of an
         aggregate,  ten percent,  cumulative,  noncompounded  annual  return on
         their adjusted capital contributions (the "10% Preferred Return").



<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


7.       Allocations and Distributions - Continued:

         Generally,  net  sales  proceeds  from  the sale of  properties  not in
         liquidation  of the  Partnership,  to the extent  distributed,  will be
         distributed  first to the limited  partners in an amount  sufficient to
         provide them with their 10% Preferred Return,  plus the return of their
         adjusted capital contributions. The general partners will then receive,
         to  the  extent  previously  subordinated  and  unpaid,  a one  percent
         interest  in all prior  distributions  of net cash flow and a return of
         their  capital  contributions.  Any  remaining  sales  proceeds will be
         distributed 95 percent to the limited  partners and five percent to the
         general  partners.  Any  gain  from  the  sale  of a  property  not  in
         liquidation of the  Partnership  is, in general,  allocated in the same
         manner as net sales proceeds are distributable.  Any loss from the sale
         of a property is, in general,  allocated first, on a pro rata basis, to
         partners with positive balances in their capital accounts;  thereafter,
         95 percent to the  limited  partners  and five  percent to the  general
         partners.

         Generally,  net sales  proceeds from a liquidating  sale of properties,
         will be used in the following  order: i) first to pay and discharge all
         of the Partnership's liabilities to creditors, ii) second, to establish
         reserves that may be deemed necessary for any anticipated or unforeseen
         liabilities or obligations of the  Partnership,  iii) third, to pay all
         of the  Partnership's  liabilities,  if any, to the general and limited
         partners,  iv) fourth,  after  allocations of net income,  gains and/or
         losses,  to distribute to the partners  with positive  capital  account
         balances,  in proportion to such balances,  up to amounts sufficient to
         reduce such positive  balances to zero,  and v)  thereafter,  any funds
         remaining shall then be distributed 95 percent to the limited  partners
         and five percent to the general partners.

         During  the  years  ended  December  31,  1998,  1997,  and  1996,  the
         Partnership   declared   distributions   to  the  limited  partners  of
         $3,850,003, $3,150,003, and $3,412,500,  respectively. No distributions
         have been made to the general partners to date.


<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


8.       Income Taxes:

         The following is a reconciliation of net income for financial reporting
         purposes to net income for federal  income tax  purposes  for the years
         ended December 31:
<TABLE>
<CAPTION>

                                                                    1998                 1997               1996
                                                                 --------------      --------------     --------------
<S> <C>
                  Net income for financial
                      reporting purposes                          $3,288,912            $3,241,567         $3,096,992

                  Depreciation for tax reporting
                      purposes in excess of
                      depreciation for financial
                      reporting purposes                            (166,412   )          (204,419 )         (219,372 )

                  Direct financing leases recorded as
                      operating leases for tax
                      reporting purposes                             177,946               178,250            157,197

                  Allowance for doubtful accounts                      5,408                18,954            (23,716 )

                  Accrued rental income                             (116,089   )          (133,237 )         (219,757 )

                  Rents paid in advance                                9,293               (21,446 )           42,637

                  Gain or loss on sale of land and
                      buildings for tax reporting
                      purposes  in  excess  of  gain or
                      loss for financial reporting purposes            3,170                   670             99,031

                  Capitalized transaction costs for tax
                      reporting purposes                              21,042                    --                 --

                  Equity in earnings of unconsolidated
                      joint ventures for tax reporting
                      purposes   in   excess  of  (less
                      than) equity in earnings of
                      unconsolidated joint ventures for
                      financial reporting purposes                    15,563                (2,987 )           13,320

                  Minority interest in timing differences
                      of consolidated joint venture                    1,443                 1,571              1,677
                                                                 --------------      --------------     --------------

                  Net income for federal income tax
                      purposes                                    $3,240,276            $3,078,923         $2,948,009
                                                                 ==============      ==============     ==============
</TABLE>


<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


9.       Related Party Transactions:

         One of the individual general partners, James M. Seneff, Jr., is one of
         the principal shareholders of CNL Group, Inc., the majority stockholder
         of CNL Fund Advisors, Inc. The other individual general partner, Robert
         A. Bourne, serves as treasurer, director and vice chairman of the board
         of CNL Fund  Advisors,  Inc.  During the years ended December 31, 1998,
         1997, and 1996, CNL Fund Advisors, Inc. (hereinafter referred to as the
         "Affiliate")  performed  certain  services  for  the  Partnership,   as
         described below.

         During the years ended December 31, 1998, 1997, and 1996, the Affiliate
         acted  as  manager  of  the  Partnership's  properties  pursuant  to  a
         management agreement with the Partnership. In connection therewith, the
         Partnership  agreed  to pay the  Affiliate  an  annual,  noncumulative,
         subordinated management fee of one percent of the sum of gross revenues
         from properties  wholly owned by the Partnership and the  Partnership's
         allocable  share of gross  revenues  from  joint  ventures,  but not in
         excess of competitive fees for comparable services.  These fees will be
         incurred  and will be payable only after the limited  partners  receive
         their  10%  Preferred  Return.  Due to the  fact  that  these  fees are
         noncumulative,  if the limited  partners  have not  received  their 10%
         Preferred Return in any particular year, no management fees will be due
         or payable for such year. As a result of such threshold,  no management
         fees were incurred during the years ended December 31, 1998,  1997, and
         1996.

         The Affiliate is also entitled to receive a deferred, subordinated real
         estate disposition fee, payable upon the sale of one or more properties
         based on the lesser of one-half of a competitive real estate commission
         or three  percent  of the  sales  price  if the  Affiliate  provides  a
         substantial amount of services in connection with the sale. However, if
         the net sales  proceeds are  reinvested in a replacement  property,  no
         such  real  estate   disposition  fees  will  be  incurred  until  such
         replacement   property  is  sold  and  the  net  sales   proceeds   are
         distributed.  The  payment  of  the  real  estate  disposition  fee  is
         subordinated to receipt by the limited  partners of their aggregate 10%
         Preferred Return, plus their adjusted capital contributions. During the
         year ended  December  31, 1996,  the  Partnership  incurred  $41,250 in
         deferred,  subordinated  real estate  disposition fees as the result of
         the sale of the property in Orlando, Florida. No deferred, subordinated
         real estate disposition fees were incurred for the years ended December
         31, 1998 and 1997.



<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


9.       Related Party Transactions - Continued:

         During the years ended December 31, 1998, 1997, and 1996, the Affiliate
         provided accounting and administrative services to the Partnership on a
         day-to-day basis. The Partnership incurred $96,202, $80,461 and $89,317
         for the years ended December 31, 1998,  1997,  and 1996,  respectively,
         for such services.

         The due to related parties consisted of the following at December 31:
<TABLE>
<CAPTION>

                                                                          1998                  1997
                                                                     ---------------       ---------------
<S> <C>
                 Due to Affiliates:
                     Accounting and administrative
                        services                                            $20,216                $4,599
                     Deferred, subordinated real
                        estate disposition fee                               55,050                55,050
                                                                     ---------------       ---------------

                                                                            $75,266               $59,649
                                                                     ===============       ===============
</TABLE>

10.      Concentration of Credit Risk:

         The  following  schedule  presents  total rental and earned income from
         individual  lessees,  each  representing  more than ten  percent of the
         Partnership's   total   rental  and  earned   income   (including   the
         Partnership's  share  of  total  rental  and  earned  income  from  the
         unconsolidated joint ventures) for each of the years ended December 31:
<TABLE>
<CAPTION>

                                                                     1998               1997              1996
                                                                 -------------      -------------     --------------
<S> <C>
          Golden Corral Corporation                                  $728,641           $706,839           $663,889
          Restaurant Management Services, Inc.                        527,360            531,110            533,990
          Carrols Corporation.                                        482,081            523,517            526,034
          Flagstar Enterprises, Inc. and Quincy's
              Restaurants, Inc.                                           N/A                N/A            356,720

</TABLE>


<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


10.      Concentration of Credit Risk - Continued:

         In addition,  the following  schedule  presents total rental and earned
         income from individual  restaurant chains,  each representing more than
         ten  percent  of the  Partnership's  total  rental  and  earned  income
         (including  the  Partnership's  share of total rental and earned income
         from the  unconsolidated  joint ventures),  for each of the years ended
         December 31:
<TABLE>
<CAPTION>

                                                                   1998                 1997               1996
                                                               --------------      ---------------     --------------
<S> <C>
          Burger King                                              $ 961,542           $1,003,419          $ 989,480
          Golden Corral Family Steakhouse
              Restaurants                                            750,869              735,949            681,042
          Shoney's                                                   603,304              607,054            609,072
</TABLE>

         The  information   denoted  by  N/A  indicates  that  for  each  period
         presented,  the tenant and the chains did not  represent  more than ten
         percent of the Partnership's total rental and earned income.

         Although  the  Partnership's   properties  are  geographically  diverse
         throughout the United States and the  Partnership's  lessees  operate a
         variety of restaurant concepts,  default by any one of these lessees or
         restaurant chains could significantly  impact the results of operations
         of the  Partnership  if the  Partnership  is not able to  re-lease  the
         properties in a timely manner.

11.      Subsequent Event:

         On March 11, 1999, the  Partnership  entered into an Agreement and Plan
         of Merger with CNL American Properties Fund, Inc. ("APF"),  pursuant to
         which the Partnership would be merged with and into a subsidiary of APF
         (the  "Merger").  As  consideration  for the Merger,  APF has agreed to
         issue 4,042,635  shares of its common stock, par value $0.01 per shares
         (the "APF  Shares")  which,  for the  purposes  of  valuing  the merger
         consideration,  have been  valued by APF at $10.00 per APF  Share,  the
         price paid by APF  investors in APF's most recent public  offering.  In
         order to assist the general  partners in evaluating the proposed merger
         consideration,  the general partners retained Valuation  Associates,  a
         nationally  recognized  real estate  appraisal  firm,  to appraise  the
         Partnership's   restaurant  property  portfolio.   Based  on  Valuation
         Associates'  appraisal,  the Partnership's property portfolio and other
         assets were valued on a going  concern basis  (meaning the  Partnership
         continues unchanged) at $39,843,631 as of December 31, 1998. Legg Mason
         Wood Walker,  Incorporated has rendered a fairness opinion that the APF
         Share consideration,  payable by APF, is fair to the Partnership from a
         financial point of view.


<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 1998, 1997, and 1996


11.      Subsequent Event - Continued:

         The APF Shares are  expected  to be listed for  trading on the New York
         Stock Exchange  concurrently with the consummation of the Merger,  and,
         therefore, would be freely tradable at the option of the former limited
         partners.  At a special  meeting of the partners that is expected to be
         held in the third quarter of 1999,  limited  partners holding in excess
         of 50% of the Partnership's  outstanding limited partnership  interests
         must approve the Merger prior to consummation of the  transaction.  The
         general  partners intend to recommend that the limited  partners of the
         Partnership    approve   the   Merger.   In   connection   with   their
         recommendation,  the general  partners  will solicit the consent of the
         limited partners at the special meeting. If the limited partners reject
         the Merger,  the  Partnership  will bear the portion of the transaction
         costs based upon the percentage of "For" votes and the general partners
         will  bear  the  portion  of such  transaction  costs  based  upon  the
         percentage of "Against" votes and abstentions.



<PAGE>


Item 9.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure

         None.



                                    PART III


Item 10.  Directors and Executive Officers of the Registrant

         The General Partners of the Registrant are James M. Seneff, Jr., Robert
A.  Bourne  and CNL  Realty  Corporation,  a Florida  corporation.  The  General
Partners  manage  and  control  the  Partnership's   affairs  and  have  general
responsibility   and  the  ultimate  authority  in  all  matters  affecting  the
Partnership's  business.  The  Partnership  has  available  to it the  services,
personnel and experience of CNL Fund Advisors,  Inc., CNL Group,  Inc. and their
affiliates, all of which are affiliates of the General Partners.

         James M. Seneff, Jr., age 52, is a principal  stockholder of CNL Group,
Inc., a diversified  real estate company,  and has served as its Chairman of the
Board of Directors,  a director and Chief Executive  Officer since its formation
in 1980. Mr. Seneff has been Chairman of the Board of Directors,  director,  and
Chief Executive Officer of CNL Securities Corp. since its formation in 1979. Mr.
Seneff also has held the position of Chairman of the Board of  Directors,  Chief
Executive  Officer,   President  and  director  of  CNL  Management  Company,  a
registered investment advisor,  since its formation in 1976, has served as Chief
Executive  Officer,  Chairman  of the Board  and a  director  of CNL  Investment
Company,  has served as Chief Executive  Officer, a director and Chairman of the
Board of Directors of Commercial Net Lease Realty, Inc., a publicly-traded REIT,
listed on the NYSE, since 1992,  served as Chief Executive  Officer,  a director
and  Chairman of the Board of Directors of CNL Realty  Advisors,  Inc.  from its
inception in May 1992 through  December  1997, at which time such company merged
with  Commercial  Net Lease  Realty,  Inc.,  and has held the  position of Chief
Executive  Officer,  Chairman of the Board and a director  of CNL  Institutional
Advisors, Inc., a registered investment advisor, since its inception in December
1990.  Mr.  Seneff  has  served as  Chairman  of the Board of  Directors  of CNL
American  Properties  Fund, Inc. since December 1994 and as a director and Chief
Executive  Officer  since May 1994.  Mr.  Seneff has served as  Chairman  of the
Board,  Chief Executive Officer and a director of CNL Fund Advisors,  Inc. since
March 1994.  Mr.  Seneff has served as Chairman  of the Board,  Chief  Executive
Officer and a director of CNL Hospitality  Properties,  Inc. since June 1996 and
of CNL Hospitality Advisors, Inc. since January 1997. Mr. Seneff has also served
as Chairman of the Board,  Chief Executive  Officer and a director of CNL Health
Care  Properties,  Inc. since  December 1997 and CNL Health Care Advisors,  Inc.
since July 1997. Mr. Seneff previously served on the Florida State Commission on
Ethics  and is a  former  member  and past  Chairman  of the  State  of  Florida
Investment  Advisory Council,  which advises the Florida Board of Administration
investments for various Florida employee  retirement funds. The Florida Board of
Administration,  Florida's  principal  investment  advisory and money management
agency,  oversees the  investment of more then $60 billion of retirement  funds.
Mr.  Seneff  has  served as a member of the board of  directors  of First  Union
National  Bank of  Florida  since  May 1998 and has  served  as a member  of the
Orlando Advisory Board of First Union National Bank of Florida since March 1994.
Since 1971,  Mr.  Seneff has been active in the  acquisition,  development,  and
management  of real  estate  projects  and,  directly  or through an  affiliated
entity,  has  served as a general  partner  or joint  venturer  in over 100 real
estate ventures involved in the financing, acquisition, construction, and rental
of restaurants,  office buildings,  apartment complexes,  hotels, and other real
estate.  Included in these real estate ventures are  approximately  65 privately
offered  real  estate  limited  partnerships  in which Mr.  Seneff,  directly or
through an affiliated  entity,  serves or has served as a general partner.  Also
included are CNL Income Fund,  Ltd.,  CNL Income Fund II, Ltd.,  CNL Income Fund
III,  Ltd.,  CNL Income Fund IV, Ltd.,  CNL Income Fund V, Ltd., CNL Income Fund
VI, Ltd.,  CNL Income Fund VII,  Ltd., CNL Income Fund IX, Ltd., CNL Income Fund
X, Ltd.,  CNL Income Fund XI, Ltd.,  CNL Income Fund XII,  Ltd., CNL Income Fund
XIII, Ltd., CNL Income Fund XIV, Ltd., CNL Income Fund XV, Ltd., CNL Income Fund
XVI, Ltd., CNL Income Fund XVII, Ltd. and CNL Income Fund XVIII,  Ltd. (the "CNL
Income  Fund  Partnerships"),  public  real  estate  limited  partnerships  with
investment  objectives similar to those of the Partnership,  in which Mr. Seneff
serves as a  general  partner.  Mr.  Seneff  received  his  degree  in  Business
Administration from Florida State University in 1968.

         Robert A.  Bourne,  age 51, is  President  and  Treasurer of CNL Group,
Inc.,  President,  Treasurer,  a director,  and a  registered  principal  of CNL
Securities  Corp.,  President,  Treasurer,  and a  director  of  CNL  Investment
Company,  and  Chief  Investment  Officer,  a  director  and  Treasurer  of  CNL
Institutional Advisors, Inc., a registered investment advisor. Mr. Bourne served
as President of CNL Institutional  Advisor,  Inc. from the date of its inception
through  July 1997.  Mr.  Bourne  served as President  of  Commercial  Net Lease
Realty,  Inc.  from July 1992 through  February  1996,  served as Secretary  and
Treasurer from February 1996 through December 1997, and has served as a director
since July 1992 and as Vice  Chairman of the Board of Directors  since  February
1996. In addition,  Mr. Bourne served as President of CNL Realty Advisors,  Inc.
from May 1992 through  February  1996,  served as Treasurer  from  February 1996
through  December 1997,  served as a director from May 1992 through December 31,
1997 and served as Vice Chairman from  February 1996 through  December  1997, at
which time such company merged with Commercial Net Lease Realty, Inc. Mr. Bourne
has served as a Vice  Chairman of the Board of  Directors  and  Treasurer of CNL
American  Properties  Fund,  Inc.  since February 1999, has served as a director
since May 1994 and previously served as President from May 1994 through February
1999. Mr. Bourne has served as a director of CNL Fund Advisors, Inc. since March
1994, has served as Treasurer and Vice Chairman of the Board of Directors  since
September  1997,  and  previously  served as  President  from March 1994 through
September  1997.  Mr.  Bourne has  served as  President  and a  director  of CNL
Hospitality  Properties,  Inc. since June 1996 and of CNL Hospitality  Advisors,
Inc.  since January 1997. Mr. Bourne has served as President and director of CNL
Health Care  Properties,  Inc. since December 1997 and CNL Health Care Advisors,
Inc. since July 1997. Mr. Bourne,  who joined CNL Securities  Corp. in 1979, has
participated  as a general  partner or joint  venturer  in over 100 real  estate
ventures  involved in the financing,  acquisition,  construction,  and rental of
restaurants,  office  buildings,  apartment  complexes,  hotels,  and other real
estate.  Included in these real estate ventures are  approximately  64 privately
offered  real  estate  limited  partnerships  in which Mr.  Bourne,  directly or
through an affiliated  entity,  serves or has served as a general partner.  Also
included  are the CNL Income  Fund  Partnerships,  public  real  estate  limited
partnerships with investment objectives similar to those of the Partnership,  in
which  Mr.  Bourne  serves as a  general  partner.  Mr.  Bourne  formerly  was a
certified public  accountant with Coopers & Lybrand and a partner in the firm of
Bourne & Rose, P.A. Mr. Bourne received a B.A. in Accounting,  with honors, from
Florida State University in 1970.

         CNL Realty Corporation is a corporation organized on November 26, 1985,
under the laws of the State of Florida.  Its sole directors and shareholders are
James M. Seneff, Jr. and Robert A. Bourne, the individual General Partners.  CNL
Realty  Corporation  was organized to serve as the corporate  general partner of
real estate limited partnerships,  such as the Partnership,  organized by one or
both of the individual General Partners. CNL Realty Corporation currently serves
as the corporate general partner of the CNL Income Fund Partnerships.

         CNL  Fund  Advisors,  Inc.  provides  certain  management  services  in
connection with the Partnership and its Properties. CNL Fund Advisors, Inc. is a
corporation  organized  in 1994 under the laws of the State of Florida,  and its
principal  office is located at 400 East South Street,  Orlando,  Florida 32801.
CNL Fund  Advisors,  Inc. is a majority owned  subsidiary of CNL Group,  Inc., a
diversified  real  estate  company,   and  was  organized  to  perform  property
acquisition, property management and other services.

         CNL  Group,  Inc.,  which is the parent  company of CNL Fund  Advisors,
Inc.,  was organized in 1980 under the laws of the State of Florida.  CNL Group,
Inc. is a diversified  real estate  company which  provides a wide range of real
estate,  development  and  financial  services to companies in the United States
through the  activities  of its  subsidiaries.  These  activities  are primarily
focused  on the  franchised  restaurant  and  hospitality  industries.  James M.
Seneff,  Jr., an individual General Partner of the Partnership,  is the Chairman
of the Board,  Chief Executive  Officer,  and a director of CNL Group,  Inc. Mr.
Seneff and his wife own all of the outstanding shares of CNL Group, Inc.

         The following persons serve as operating officers of CNL Group, Inc. or
its affiliates or  subsidiaries  in the discretion of the Boards of Directors of
those companies,  but, except as specifically indicated, do not serve as members
of the Boards of Directors of those  entities.  The Boards of Directors have the
responsibility for creating and implementing the policies of CNL Group, Inc. and
its affiliated companies.

         Curtis B. McWilliams,  age 43, joined CNL Group, Inc. in April 1997 and
currently serves as an Executive Vice President. In addition, Mr. McWilliams has
served  as  President  of  CNL  Fund  Advisors,  Inc.  and as  President  of the
Restaurant  and Financial  Services  Groups within CNL Group,  Inc.  since April
1997. Mr.  McWilliams has served as President of CNL American  Properties  Fund,
Inc. since February 1999 and previously  served as Executive Vice President from
February 1998 through February 1999. From September 1983 through March 1997, Mr.
McWilliams  was employed by Merrill  Lynch & Co.,  most  recently as Chairman of
Merrill  Lynch's  Private  Advisory  Services until March 1997.  Mr.  McWilliams
received a B.S.E. in Chemical  Engineering from Princeton University in 1977 and
a Masters of Business  Administration  with a concentration  in finance from the
University of Chicago in 1983.



<PAGE>


         John T. Walker,  age 40, has served as Executive  Vice President of CNL
American  Properties  Fund, Inc. since January 1996, as Chief Operating  Officer
since March 1995, and previously  served as Senior Vice President since December
1994. In addition, Mr. Walker has served as Executive Vice President of CNL Fund
Advisors, Inc. since January 1996, Chief Operating Officer since April 1995, and
previously  served as Senior Vice President  from November 1994 through  January
1996. In addition,  Mr. Walker  previously served as Executive Vice President of
CNL Hospitality  Properties,  Inc. and CNL Hospitality  Advisors,  Inc. From May
1992 to May 1994, Mr. Walker, a certified public accountant,  was Executive Vice
President for Finance and Administration and Chief Financial Officer of Z Music,
Inc.,   a  cable   television   network   (subsequently   acquired   by  Gaylord
Entertainment),   where  he  was   responsible   for   overall   financial   and
administrative  management  and planning.  From January 1990 through April 1992,
Mr. Walker was Chief  Financial  Officer of the First Baptist Church in Orlando,
Florida.  From  April  1984  through  December  1989,  he was a  partner  in the
accounting firm of Chastang, Ferrell & Walker, P.A., where he was the partner in
charge of audit and consulting services, and from 1981 to 1984, Mr. Walker was a
Senior  Consultant/Audit  Senior at Price Waterhouse.  Mr. Walker is a Cum Laude
graduate of Wake Forest University with a B.S. in Accountancy and is a certified
public accountant.

         Lynn E. Rose,  age 50, a  certified  public  accountant,  has served as
Secretary of CNL American  Properties  Fund, Inc. since December 1994 and served
as Treasurer from December 1994 through  February 1999. Ms. Rose has served as a
director  and  Secretary of CNL Fund  Advisors,  Inc.  since March 1994,  and as
Treasurer  from the date of its  inception  through June 30, 1997.  Ms. Rose has
served as Secretary of CNL Group, Inc. since 1987, as Chief Financial Officer of
CNL Group, Inc. since December 1993, and served as Controller of CNL Group, Inc.
from 1987  until  December  1993.  In  addition,  Ms.  Rose has  served as Chief
Financial Officer and Secretary of CNL Securities Corp. since July 1994. She has
served as Chief Operating Officer, Vice President and Secretary of CNL Corporate
Services,  Inc. since November 1994. Ms. Rose also has served as Chief Financial
Officer and Secretary of CNL Institutional Advisors, Inc. since its inception in
1990, as Treasurer of CNL Realty Advisors,  Inc. from 1991 to February 1996, and
as Secretary and a director of CNL Realty Advisors,  Inc. since its inception in
1991 until  December 31, 1997, at which time CNL Realty  Advisors,  Inc.  merged
with Commercial Net Lease Realty, Inc. In addition, Ms. Rose served as Secretary
and Treasurer of Commercial  Net Lease Realty,  Inc. from 1992 to February 1996.
Ms. Rose also serves as Secretary and Treasurer of CNL  Hospitality  Properties,
Inc. and CNL Health Care  Properties,  Inc. and as  Secretary,  Treasurer  and a
director of CNL Hospitality  Advisors,  Inc. and CNL Health Care Advisors,  Inc.
Ms. Rose also  currently  serves as Secretary  for  approximately  50 additional
corporations.  Ms.  Rose  oversees  the  legal  compliance,  accounting,  tenant
compliance,  and reporting  for over 250  corporations,  partnerships  and joint
ventures.  Prior to joining CNL, Ms. Rose was a partner with Robert A. Bourne in
the accounting firm of Bourne & Rose, P.A.,  Certified Public  Accountants.  Ms.
Rose holds a B.A. in Sociology from the University of Central Florida.

         Jeanne A. Wall,  age 40, has served as Executive  Vice President of CNL
American  Properties  Fund,  Inc.  since  December  1994. Ms. Wall has served as
Executive  Vice  President of CNL Fund  Advisors,  Inc. since November 1994, and
previously  served as Vice President from March 1994 through  November 1994. Ms.
Wall has served as Chief Operating Officer of CNL Investment  Company and of CNL
Securities  Corp. since November 1994 and has served as Executive Vice President
of CNL  Investment  Company since January 1991.  Ms. Wall joined CNL  Securities
Corp. in 1984. In 1985, Ms. Wall became Vice  President of CNL Securities  Corp.
In 1987, she became Senior Vice President and in July 1997 she became  Executive
Vice  President of CNL  Securities  Corp. In this  capacity,  Ms. Wall serves as
national  marketing and sales director and oversees the national  marketing plan
for  the CNL  investment  programs.  In  addition,  Ms.  Wall  oversees  product
development,  partnership  administration  and  investor  services  for programs
offered  through  participating  brokers and  corporate  communications  for CNL
Group,  Inc.  and its  affiliates.  Ms.  Wall also has  served  as  Senior  Vice
President of CNL Institutional Advisors,  Inc., a registered investment advisor,
from 1990 to 1993,  as Vice  President of CNL Realty  Advisors,  Inc.  since its
inception in 1991 until  December 31, 1997,  at which time CNL Realty  Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., and served as Vice President
of  Commercial  Net Lease Realty,  Inc. from 1992 through  December 31, 1997. In
addition,  Ms.  Wall  serves as  Executive  Vice  President  of CNL  Hospitality
Properties,  Inc., CNL Hospitality  Advisors,  Inc., CNL Health Care Properties,
Inc.  and CNL Health  Care  Advisors,  Inc.  Ms.  Wall holds a B.A.  in Business
Administration  from  Linfield  College  and is a  registered  principal  of CNL
Securities  Corp.  Ms.  Wall  currently  serves as a trustee on the board of the
Investment Program Association and on the Direct Participation Program committee
for the National Association of Securities Dealers (NASD).

         Steven D.  Shackelford,  age 35, a  certified  public  accountant,  has
served as Chief Financial  Officer of CNL American  Properties  Fund, Inc. since
January 1997 and as Chief  Financial  Officer of CNL Fund  Advisors,  Inc. since
September  1996.  From  March 1995 to July 1996,  Mr.  Shackelford  was a senior
manager in the national office of Price  Waterhouse where he was responsible for
advising  foreign  clients  seeking to raise capital and a public listing in the
United  States.  From August  1992 to March 1995,  he served as a manager in the
Price Waterhouse,  Paris, France office serving several  multinational  clients.
Mr.  Shackelford  was an audit  staff and audit  senior from 1986 to 1992 in the
Orlando, Florida office of Price Waterhouse.  Mr. Shackelford received a B.A. in
Accounting,  with honors, and a Masters of Business  Administration from Florida
State University.


Item 11.  Executive Compensation

         Other than as  described in Item 13, the  Partnership  has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates.  There are no compensatory plans or arrangements  regarding
termination of employment or change of control.


Item 12.  Security Ownership of Certain Beneficial Owners and Management

         As of March 11,  1999,  no person was known to the  Registrant  to be a
beneficial owner of more than five percent of the Units.

         The following  table sets forth,  as of March 11, 1999,  the beneficial
ownership interests of the General Partners in the Registrant.

<TABLE>
<CAPTION>

                  Title of Class                 Name of Partner                     Percent of Class
<S> <C>
         General Partnership Interests           James M. Seneff, Jr.                       45%
                                                 Robert A. Bourne                           45%
                                                 CNL Realty Corporation                     10%
                                                                                          -----
                                                                                           100%
</TABLE>


         Neither the General  Partners,  nor any of their  affiliates,  owns any
interest  in the  Registrant,  except as noted  above.  On March 11,  1999,  the
Registrant  entered  into an  Agreement  and Plan of  Merger  with CNL  American
Properties  Fund, Inc.  ("APF") pursuant to which the Registrant would be merged
with and into a subsidiary of APF (the "Merger").  For further  discussion,  see
Item 8. Financial Statements and Supplementary Data -- Note 11.
Subsequent Event.




<PAGE>


Item 13.  Certain Relationships and Related Transactions

         The  table  below   summarizes  the  types,   recipients,   methods  of
computation and amounts of compensation,  fees and distributions paid or payable
by the  Partnership  to the General  Partners and their  affiliates for the year
ended  December 31, 1998,  exclusive of any  distributions  to which the General
Partners or their  affiliates  may be entitled by reason of their  purchase  and
ownership of Units.
<TABLE>
<CAPTION>

                                                                                                 Amount Incurred
       Type of Compensation                                                                       For the Year
            and Recipient                            Method of Computation                   Ended December 31, 1998
      -----------------------                        ---------------------                   -----------------------
<S> <C>
Reimbursement     to    affiliates    for     Operating  expenses  are  reimbursed     Operating   expenses   incurred   on
operating expenses                            at the  lower of cost or 90  percent     behalf of the Partnership: $98,613
                                              of  the  prevailing  rate  at  which
                                              comparable  services could have been     Accounting    and     administrative
                                              obtained  in  the  same   geographic     services:  $96,202
                                              area.   Affiliates  of  the  General
                                              Partners  from  time to  time  incur
                                              certain   operating    expenses   on
                                              behalf of the  Partnership for which
                                              the   Partnership   reimburses   the
                                              affiliates without interest.

Annual,  subordinated  manage-ment fee to     One  percent  of the  sum  of  gross     $ - 0 -
affiliates                                    operating  revenues from  Properties
                                              wholly  owned  by the  Partnership
                                              plus the  Partnership's  allocable
                                              share of gross  revenues  of joint
                                              ventures in which the  Partnership
                                              is a co-venturer,  subordinated to
                                              certain  minimum  returns  to  the
                                              Limited  Partners.  The management
                                              fee  will not  exceed  competitive
                                              fees for comparable services.  Due
                                              to  the  fact   that   these   are
                                              non-cumulative   if  the   Limited
                                              Partners  have not received  their
                                              10%   Preferred   Return   in  any
                                              particular   years  no  management
                                              fees  will be due or  payable  for
                                              such year.


</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                                                                                 Amount Incurred
       Type of Compensation                                                                       For the Year
            and Recipient                            Method of Computation                   Ended December 31, 1998
      -----------------------                        ---------------------                   -----------------------
<S> <C>
Deferred,    subordinated   real   estate     A   deferred,    subordinated   real     $ - 0 -
disposition fee payable to                    estate   disposition   fee,  payable
affiliates                                    upon    sale    of   one   or   more
                                              Properties,  in an amount equal to
                                              the  lesser of (i)  one-half  of a
                                              competitive       real      estate
                                              commission,  or (ii) three percent
                                              of  the   sales   price   of  such
                                              Property or Properties. Payment of
                                              such  fee  shall  be made  only if
                                              affiliates of the General Partners
                                              provide  a  substantial  amount of
                                              services  in  connection  with the
                                              sale of a Property  or  Properties
                                              and  shall  be   subordinated   to
                                              certain  minimum  returns  to  the
                                              Limited Partners.  However, if the
                                              net  sales  are  reinvested  in  a
                                              replacement Property, no such real
                                              estate  disposition  fee  will  be
                                              incurred  until  such  replacement
                                              Property  is sold an the net sales
                                              proceeds are distributed.

General        Partners'        deferred,     A   deferred,   subordinated   share     $ - 0 -
sub-ordinated  share of  Partnership  net     equal to one percent of  Partnership
cash flow                                     distributions   of  net  cash  flow,
                                              subordinated   to  certain   minimum
                                              returns to the Limited Partners.

General        Partners'        deferred,     A   deferred,   subordinated   share     $ - 0 -
sub-ordinated  share of  Partnership  net     equal    to    five    percent    of
sales  proceeds  from a sale or sales not     Partnership  distributions  of  such
in liquidation of the Partnership             net sales proceeds,  subordinated to
                                              certain   minimum   returns  to  the
                                              Limited Partners.


</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                                                                                 Amount Incurred
       Type of Compensation                                                                       For the Year
            and Recipient                            Method of Computation                   Ended December 31, 1998
      -----------------------                        ---------------------                   -----------------------
<S> <C>
General  Partners'  share of  Partnership     Distributions  of net sales proceeds     $ - 0 -
net sales  proceeds  from a sale or sales     from   a   sale    or    sales    of
in liquidation of the Partnership             substantially     all     of     the
                                              Partnership's   assets   will   be
                                              distributed in the following order
                                              or priority: (i) first, to pay all
                                              debts  and   liabilities   of  the
                                              Partnership   and   to   establish
                                              reserves; (ii) second, to Partners
                                              with  positive   capital   account
                                              balances,   determined  after  the
                                              allocation  of  net  income,   net
                                              loss, gain and loss, in proportion
                                              to such  balances,  up to  amounts
                                              sufficient to reduce such balances
                                              to zero; and (iii) thereafter, 95%
                                              to the Limited  Partners and 5% to
                                              the General Partners.
</TABLE>


         As discussed  above in Item 8. Financial  Statements and  Supplementary
Data -- Note 11.  Subsequent Event, the Registrant has entered into an Agreement
and Plan of  Merger,  dated  March  11,  1999,  with APF  pursuant  to which the
Registrant would be merged with and into a subsidiary of APF in exchange for the
issuance of APF Shares.  The APF Shares are expected to be listed for trading on
the New York Stock Exchange concurrently with the consummation of the Merger. If
the Merger is approved by Limited Partners holding units greater than 50% of the
outstanding  units of the  Registrant,  the General  Partners of the  Registrant
would receive certain benefits, including:

         o        With respect to their ownership in the Registrant, the General
                  Partners  will be issued  approximately  54,864  shares of APF
                  common stock, par value $0.01 per share.

         o        Following  the  Merger,  James M.  Seneff,  Jr.  and Robert A.
                  Bourne,  the  individual  General  Partners,  will continue to
                  serve as directors of APF, with Mr. Seneff serving as Chairman
                  and Mr. Bourne  serving as Vice  Chairman.  As APF  directors,
                  they may also be entitled to receive  stock  options under any
                  stock option plan adopted by APF.



<PAGE>


                                     PART IV


Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)       The following documents are filed as part of this report.

          1.  Financial Statements

                  Report of Independent Accountants

                  Balance Sheets at December 31, 1998 and 1997

                  Statements  of Income for the years ended  December  31, 1998,
                  1997, and 1996

                  Statements of Partners'  Capital for the years ended  December
                  31, 1998, 1997, and 1996

                  Statements  of Cash  Flows for the years  ended  December  31,
                  1998, 1997, and 1996

                  Notes to Financial Statements

          2.  Financial Statement Schedules

                  Schedule  III - Real Estate and  Accumulated  Depreciation  at
                  December 31, 1998

                  Notes  to  Schedule   III  -  Real   Estate  and   Accumulated
                  Depreciation at December 31, 1998

                  Schedule IV - Mortgage  Loans on Real  Estate at December  31,
                  1998

                  All other Schedules are omitted as the required information is
                  inapplicable  or is presented in the  financial  statements or
                  notes thereto.

          3.  Exhibits

                  3.1      Affidavit and  Certificate of Limited  Partnership of
                           CNL Income Fund VIII,  Ltd.  (Included as Exhibit 3.2
                           to  Registration  Statement No. 33-31482 on Form S-11
                           and incorporated herein by reference.)

                  4.1      Affidavit and  Certificate of Limited  Partnership of
                           CNL Income Fund VIII,  Ltd.  (Included as Exhibit 3.2
                           to  Registration  Statement No. 33-31482 on Form S-11
                           and incorporated herein by reference.)

                  4.2      Amended and Restated Agreement of Limited Partnership
                           of CNL Income Fund VIII,  Ltd.  (Included  as Exhibit
                           4.2 to  Form  10-K  filed  with  the  Securities  and
                           Exchange   Commission   on   April   1,   1996,   and
                           incorporated herein by reference.)

                  10.1     Management  Agreement  between  CNL Income Fund VIII,
                           Ltd. and CNL Investment  Company (Included as Exhibit
                           10.1 to Form  10-K  filed  with  the  Securities  and
                           Exchange   Commission   on   April   1,   1996,   and
                           incorporated herein by reference.)

                  10.2     Assignment   of   Management   Agreement   from   CNL
                           Investment Company to CNL Income Fund Advisors,  Inc.
                           (Included as Exhibit 10.2 to Form 10-K filed with the
                           Securities and Exchange Commission on March 30, 1995,
                           and incorporated herein by reference.)



<PAGE>


                  10.3     Assignment  of Management  Agreement  from CNL Income
                           Fund  Advisors,  Inc.  to  CNL  Fund  Advisors,  Inc.
                           (Included as Exhibit 10.3 to Form 10-K filed with the
                           Securities and Exchange  Commission on April 1, 1996,
                           and incorporated herein by reference.)

                  27       Financial Data Schedule (Filed herewith.)

         (b)      The Registrant  filed no reports on Form 8-K during the period
                  October 1, 1998 through December 31, 1998.


<PAGE>






                                   SIGNATURES


         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto duly  authorized,  on the 30th day of
March, 1999.

                                          CNL INCOME FUND VIII, LTD.

                                          By:      CNL REALTY CORPORATION
                                                   General Partner

                                                   /s/ Robert A. Bourne 
                                                   ---------------------------
                                                   ROBERT A. BOURNE, President


                                          By:      ROBERT A. BOURNE
                                                   General Partner

                                                   /s/ Robert A. Bourne 
                                                   ---------------------------
                                                   ROBERT A. BOURNE


                                          By:      JAMES M. SENEFF, JR.
                                                   General Partner

                                                   /s/ James M. Seneff, Jr. 
                                                   -----------------------------
                                                   JAMES M. SENEFF, JR.


<PAGE>


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

              Signature                                    Title                                   Date
<S> <C>
/s/ Robert A. Bourne                       President,   Treasurer  and  Director              March 30, 1999
---------------------------
Robert A. Bourne                           (Principal  Financial and  Accounting
                                           Officer)

/s/ James M. Seneff, Jr.                   Chief Executive  Officer and Director              March 30, 1999
---------------------------
James M. Seneff, Jr.                       (Principal Executive Officer)

</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                                                                   CNL INCOME FUND VIII, LTD.
                                                                (A Florida Limited Partnership)
                                                    SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                                                       December 31, 1998
<S> <C>
          
                                                                                   Costs Capitalized  
                                                                                     Subsequent To    
                                                               Initial Cost           Acquisition     
                                                      --------------------------  ------------------- 
                                        Encum-                     Buildings and  Improve-   Carrying 
                                        brances           Land     Improvements    ments      Costs   
                                      ----------      -----------  ------------- ---------   -------  
Properties the Partnership
  has Invested in Under
  Operating Leases:

    Burger King Restaurants:
      Brandon, Florida                    -            $478,467            -            -       - 
      New City, New York                  -             372,977            -      557,832       - 
      Mansfield, Ohio                     -             377,395            -      496,524       - 
      Syracuse, New York                  -             363,431            -      485,920       - 
      New Philadelphia, Ohio              -             310,920            -      523,967       - 
      Baseball City, Florida (g)          -             394,813            -            -       - 

    Denny's Restaurant:
      Tiffin, Ohio                        -             143,592      335,971            -       - 

    Golden Corral Family
     Steakhouse Restaurants:
      College Station, Texas              -             517,623            -      877,505       - 
      Houston, Texas                      -             663,999            -    1,129,910       - 
      Beaumont, Texas                     -             552,646            -      893,054       - 
      Grand Prairie, Texas                -             681,824            -      914,235       - 

    Hardee's Restaurant:
      Jefferson, Ohio                     -             150,587            -            -       - 

    Jack in the Box Restaurants:
      Waco, Texas                         -             412,942            -            -       - 
      Mesa, Arizona                       -             609,921            -            -       - 

    KFC Restaurant:
      Norton Shores, Michigan             -             177,897            -            -       - 

    Perkins Restaurant:
      Memphis, Tennessee                  -             431,065            -            -       - 

    Popeyes Famous Fried
     Chicken Restaurant:
      Jacksonville, Florida               -             103,063      114,507      149,978       - 

    Quincy's Family Steakhouse
     Restaurant:
      Statesville, North Carolina         -             257,225            -            -       - 

    Shoney's Restaurants:
      Sun City, Florida                   -             382,883            -      736,865       - 
      Brooksville, Florida                -             225,067            -            -       - 
      Bayonet Point, Florida              -             418,464            -            -       - 
      Memphis, Tennessee                  -             368,290      601,660            -       - 
      North Fort Myers, Florida           -             398,423            -            -       - 

    Wendy's Old Fashioned
     Hamburger Restaurant:
      Midlothian, Virginia                -            $365,601            -     $477,745       - 
                                                    -----------  -----------  ----------- ------- 

                                                     $9,159,115   $1,052,138   $7,243,535       - 
                                                    ===========  ===========  =========== ======= 
Property of Joint Venture in Which 
  the Partnership has an 85.54%
  Interest and has Invested in Under
  an Operating Lease:

    Burger King Restaurant:
      Asheville, North Carolina           -            $438,695     $450,432            -       - 
                                                    ===========  ===========  =========== ======= 

Properties of Joint Venture in Which
  the Partnership has a 36.8% Interest
  and has Invested in Under an
  Operating Leases:

    Burger King Restaurants:
      Columbus, Ohio                      -            $345,696     $651,985            -       - 
      San Antonio, Texas                  -             350,479      623,615            -       - 
      Pontiac, Michigan                   -             277,192      982,200            -       - 
      Raceland, Louisiana                 -             174,019      986,879            -       - 
      New Castle, Indiana                 -             264,239      662,265            -       - 
      Hastings, Minnesota                 -             155,553      657,159            -       - 
                                                    -----------  -----------  ----------- ------- 

                                                     $1,567,178   $4,564,103            -       - 
                                                    ===========  ===========  =========== ======= 

Property of Joint Venture in Which
  the Partnership has a 12.46%
  Interest and has Invested in Under
  an Operating Lease:

    Golden Corral Family
     Steakhouse Restaurant:
      Middleburg Heights, Ohio            -            $521,571            -            -       - 
                                                    ===========  ===========  =========== ======= 

Properties the Partnership has
  Invested in Under Direct
  Financing Leases:

    Burger King Restaurants:
      Brandon, Florida                    -                   -            -     $483,107       - 
      Baseball City, Florida (g)          -                   -            -      551,446       - 

    Hardee's  Restaurants:
      Brunswick, Ohio                     -             116,199      457,907            -       - 
      Grafton, Ohio                       -              66,092      411,798            -       - 
      Jefferson, Ohio                     -                   -      443,444            -       - 
      Lexington, Ohio                     -             124,707      433,264            -       - 

    Jack in the Box Restaurants:
      Waco, Texas                         -                   -            -      406,745       - 
      Mesa, Arizona                       -                   -      561,477            -       - 

    KFC Restaurants:
      Grand Rapids, Michigan              -             169,175      620,623            -       - 
      Norton Shores, Michigan             -                   -      509,228            -       - 

    Perkins Restaurant:
      Memphis, Tennessee                  -                   -            -      594,154       - 

    Quincy's Family Steakhouse
     Restaurant:
      Statesville, North Carolina         -                   -      705,444            -       - 

    Shoney's Restaurants:
      Brooksville, Florida                -                   -            -      644,369       - 
      Bayonet Point, Florida              -                   -      575,985            -       - 
      North Fort Myers, Florida           -                   -      552,240            -       - 
                                                    -----------  -----------  ----------- -------

                                                       $476,173   $5,271,410   $2,679,821       -
                                                    ===========  ===========  =========== =======

Property of Joint Venture in Which
  the Partnership has a 12.46%
  Interest and has Invested in Under
  a Direct Financing Lease:

    Golden Corral Family
     Steakhouse Restaurant:
      Middleburg Heights, Ohio            -                   -   $1,357,288            -       - 
                                                    ===========  ===========  =========== =======



                                                                            
         Gross Amount at Which                                                Life on Which  
         Carried at Close of Period (c)                                      Depreciation in      
   --------------------------------------                Date                  Latest Income               
               Buildings and              Accumulated   of Con-     Date       Statement is 
      Land      Improvements    Total     Depreciation struction  Acquired      Computed   
  -----------  -------------  ----------  -----------  ---------  ---------   ---------------  
                                                                                         
    $478,467           (f)     $478,467            -    1991        10/90          (d)       
     372,977      557,832       930,809       10,270    1977        03/91          (i)       
     377,395      496,524       873,919        9,142    1989        03/91          (i)       
     363,431      485,920       849,351        8,947    1987        03/91          (i)       
     310,920      523,967       834,887        9,647    1989        03/91          (i)       
     394,813           (f)      394,813            -    1991        02/91          (d)       
                                                                                           
                                                                                           
     143,592      335,971       479,563       61,714    1990        03/91          (h)       
                                                                                           
                                                                                           
                                                                                           
     517,623      877,505     1,395,128      242,817    1990        09/90          (b)       
     663,999    1,129,910     1,793,909      301,722    1990        10/90          (b)       
     552,646      893,054     1,445,700      255,357    1990        11/90          (b)       
     681,824      914,235     1,596,059      252,228    1990        11/90          (b)       
                                                                                           
                                                                                           
     150,587           (f)      150,587            -    1990        11/90          (d)       
                                                                                           
                                                                                           
     412,942           (f)      412,942            -    1991        11/90          (d)       
     609,921           (f)      609,921            -    1991        02/92          (d)       
                                                                                           
                                                                                           
     177,897           (f)      177,897            -    1990        03/91          (d)       
                                                                                           
                                                                                           
     431,065           (f)      431,065            -    1990        11/90          (d)       
                                                                                           
                                                                                           
                                                                                           
     103,063      264,485       367,548       70,378    1979        09/90          (b)       
                                                                                           
                                                                                           
                                                                                           
     257,225           (f)      257,225            -    1991        10/91          (d)       
                                                                                           
                                                                                           
     382,883      736,865     1,119,748      192,325    1991        10/90          (b)       
     225,067           (f)      225,067            -    1991        12/90          (d)       
     418,464           (f)      418,464            -    1989        06/91          (d)       
     368,290      601,660       969,950      148,190    1991        08/91          (b)       
     398,423           (f)      398,423            -    1991        09/95          (d)       
                                                                                           
                                                                                           
                                                                                           
    $365,601     $477,745      $843,346     $122,773    1991        03/91          (b)       
 -----------  -----------  ------------  -----------                                       
                                                                                           
  $9,159,115   $8,295,673   $17,454,788   $1,685,510                                       
 ===========  ===========  ============  ===========                                       
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
    $438,695     $450,432      $889,127     $116,948    1986        03/91          (b)       
 ===========  ===========  ============  ===========                                       
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
    $345,696     $651,985      $997,681     $157,846    1986        09/91          (b)       
     350,479      623,615       974,094      150,977    1986        09/91          (b)       
     277,192      982,200     1,259,392      237,791    1987        09/91          (b)       
     174,019      986,879     1,160,898      238,924    1988        09/91          (b)       
     264,239      662,265       926,504      160,335    1988        09/91          (b)       
     155,553      657,159       812,712      159,099    1990        09/91          (b)       
 -----------  -----------  ------------  -----------                                       
                                                                                           
  $1,567,178   $4,564,103    $6,131,281   $1,104,972                                       
 ===========  ===========  ============  ===========                                       
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
    $521,571           (f)     $521,571            -    1995        05/96          (d)       
 ===========               ============  ===========                                       
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
           -           (f)           (f)          (d)   1991        10/90          (d)       
           -           (f)           (f)          (d)   1991        02/91          (d)       
                                                                                           
                                                                                           
          (f)          (f)           (f)          (e)   1990        11/90          (e)       
          (f)          (f)           (f)          (e)   1990        11/90          (e)       
           -           (f)           (f)          (d)   1990        11/90          (d)       
          (f)          (f)           (f)          (e)   1990        11/90          (e)       
                                                                                           
                                                                                           
           -           (f)           (f)          (d)   1991        11/90          (d)       
           -           (f)           (f)          (d)   1991        02/92          (d)       
                                                                                           
                                                                                           
          (f)          (f)           (f)          (e)   1990        02/91          (e)       
           -           (f)           (f)          (d)   1990        03/91          (d)       
                                                                                           
                                                                                           
           -           (f)           (f)          (d)   1990        11/90          (d)       
                                                                                           
                                                                                           
                                                                                           
           -           (f)           (f)          (d)   1991        10/91          (d)       
                                                                                           
                                                                                           
           -           (f)           (f)          (d)   1991        12/90          (d)       
           -           (f)           (f)          (d)   1989        06/91          (d)       
           -           (f)           (f)          (d)   1991        09/95          (d)       
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
                                                                                           
           -           (f)           (f)          (d)   1995        05/96          (d)       
                                                                                           
</TABLE>





<PAGE>
                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 1998



(a)      Transactions in real estate and accumulated  depreciation  during 1998,
         1997, and 1996, are summarized as follows:
<TABLE>
<CAPTION>

                                                                                          Accumulated
                                                                        Cost             Depreciation
                                                                  -----------------     -----------------
<S> <C>
              Properties the Partnership has Invested
                in Under Operating Leases:

                   Balance, December 31, 1995                         $  15,906,963        $  1,020,592
                   Dispositions                                            (508,197)                 --
                   Depreciation expense                                          --             208,971
                                                                  -----------------     -----------------

                   Balance, December 31, 1996                            15,398,766           1,229,563
                   Depreciation expense                                          --             208,971
                                                                  -----------------     -----------------

                   Balance, December 31, 1997                            15,398,766           1,438,534
                   Reclass to operating lease                             2,064,243                   --
                   Dispositions                                              (8,221)                  --
                   Depreciation expense                                           --             246,976
                                                                  -----------------     -----------------

                   Balance, December 31, 1998                         $  17,454,788        $  1,685,510
                                                                  =================     =================

              Property of Joint Venture in Which
                the  Partnership  has an 85.54%
                Interest and has Invested in
                Under an Operating Lease:

                   Balance, December 31, 1995                           $   889,127         $    71,906
                   Depreciation expense                                          --              15,014
                                                                  -----------------     -----------------

                   Balance, December 31, 1996                               889,127              86,920
                   Depreciation expense                                          --              15,014
                                                                  -----------------     -----------------

                   Balance, December 31, 1997                               889,127             101,934
                   Depreciation expense                                          --              15,014
                                                                  -----------------     -----------------

                   Balance, December 31, 1998                           $   889,127         $   116,948
                                                                  =================     =================
</TABLE>



<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

               NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
                            DEPRECIATION - CONTINUED

                                December 31, 1998
<TABLE>
<CAPTION>

                                                                                           Accumulated
                                                                        Cost               Depreciation
                                                                  -----------------      ----------------
<S> <C>
             Property of Joint Venture in Which the
               Partnership has a 36.8% Interest and
               has Invested in Under Operating
               Leases:

                  Balance, December 31, 1995                          $  6,131,281             $  648,561
                  Depreciation expense                                          --                152,137
                                                                  -----------------      ----------------

                  Balance, December 31, 1996                             6,131,281                800,698
                  Depreciation expense                                          --                152,137
                                                                  -----------------      ----------------

                  Balance, December 31, 1997                             6,131,281                952,835
                  Depreciation expense                                          --                152,137
                                                                  -----------------      ----------------

                  Balance, December 31, 1998                          $  6,131,281            $ 1,104,972
                                                                  =================      ================

             Property of Joint  Venture  in Which
               the  Partnership  has a 12.46%
               Interest and has Invested in
               Under an Operating Lease:

                  Balance, December 31, 1995                              $     --                $    --
                  Acquisitions                                             521,571                     --
                  Depreciation expense (d)                                      --                     --
                                                                  -----------------      ----------------

                  Balance, December 31, 1996                               521,571                      --
                  Depreciation expense                                           --                      --
                                                                  -----------------      ----------------

                  Balance, December 31, 1997                               521,571                      --
                  Depreciation expense                                           --                      --
                                                                  -----------------      ----------------

                  Balance, December 31, 1998                            $  521,571                $    --
                                                                  =================      ================
</TABLE>

(b)          Depreciation  expense is computed for  buildings  and  improvements
             based upon estimated lives of 30 years.

(c)          As of December 31, 1998, the aggregate cost of the Properties owned
             by the  Partnership  and its  consolidated  joint venture,  and the
             unconsolidated  joint  ventures for federal income tax purposes was
             $26,164,478  and  $8,899,266,  respectively.  All of the leases are
             treated as operating leases for federal income tax purposes.


<PAGE>


                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

               NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
                            DEPRECIATION - CONTINUED

                                December 31, 1998


(d)          For financial reporting purposes, the portion of the lease relating
             to the building has been recorded as a direct  financing lease. The
             cost of the building  has been  included in the net  investment  in
             direct financing lease; therefore, depreciation is not applicable.

(e)          For financial reporting  purposes,  the lease for land and building
             has been recorded as a direct financing lease. The cost of the land
             and  building  has  been  included  in  net  investment  in  direct
             financing leases; therefore, depreciation is not applicable.

(f)          For financial reporting  purposes,  certain components of the lease
             relating  to land  and  building  have  been  recorded  as a direct
             financing lease. Accordingly, costs relating to these components of
             this lease are not shown.

(g)          The restaurant on this Property was converted from a Popeyes Famous
             Fried Chicken  Restaurant  to a Burger King  restaurant in February
             1993.

(h)          Effective January 1, 1994, the lease for this Property was amended,
             resulting in the  reclassification  of the building  portion of the
             lease as an operating  lease. The building was recorded at net book
             value as of January 1, 1994,  and  depreciated  over its  remaining
             estimated life of approximately 27 years.

(i)          Effective  August 1, 1998, the lease for this Property was amended,
             resulting in the  reclassification  of the building  portion of the
             lease as an operating  lease. The building was recorded at net book
             value as of August 1,  1998,  and  depreciated  over its  remaining
             estimated life of approximately 23 years.


<PAGE>






                           CNL INCOME FUND VIII, LTD.
                         (A Florida Limited Partnership)

                   SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE

                                December 31, 1998

<TABLE>
<CAPTION>
                                                                                                                       Principal
                                                                                                                        Amount
                                                                                                                       of Loans
                                                                                                                      Subject to
                                                                                                       Carrying       Delinquent
                                              Final           Periodic                    Face         Amount of     Principal or
                           Interest          Maturity         Payment       Prior      Amount of       Mortgages      Description
                             Rate              Date            Terms        Liens      Mortgages          (1)          Interest
                           ----------    ------------------   ----------   ---------   ------------   -------------  ---------------
<S> <C>
     Church's
     Jacksonville, FL
     First Mortgage          10.00%         December 2005        (2)           $ --      $ 240,000       $ 237,527            $  --

     Church's
     Jacksonville, FL
     First Mortgage          10.00%         December 2005        (3)             --        220,000         217,733               --

     Ponderosa
     Orlando, FL
     First Mortgage          10.75%          October 2011        (4)             --      1,388,568      $1,356,466               --
                                                                           ---------   ------------   -------------  ---------------

         Total                                                                 $ --     $1,848,568      $1,811,726            $  --
                                                                           =========   ============   =============  ===============
</TABLE>

(1)      The tax carrying value of the notes is $1,811,726.

(2)      Monthly  payments of  principal  and interest at an annual rate of 10%,
         with a balloon payment at maturity of $218,252.

(3)      Monthly  payments of  principal  and interest at an annual rate of 10%,
         with a balloon payment at maturity of $200,324.

(4)      Twelve  monthly  payments of interest only,  afterwards,  in 24 monthly
         installments  of $15,413  consisting  of principal  and  interest,  and
         thereafter  in  144  monthly  installments  of  $16,220  consisting  of
         principal and interest at an annual rate of 10.75%.

(5)      The changes in the carrying amounts are summarized as follows:
<TABLE>
<CAPTION>

                                                    1998             1997              1996
                                               ---------------  ---------------   ---------------
<S> <C>
         Balance at beginning of
             period                                 $1,853,386       $1,862,262         $ 463,833

         New mortgage loans                                 --               --         1,388,568

         Interest earned                               191,738          194,784            74,059

         Collection of principal and
             interest                                 (233,398)        (203,660)          (64,198)
                                               ---------------  ---------------   ---------------

         Balance at end of period                   $1,811,726       $1,853,386        $1,862,262
                                               ===============  ===============   ===============
</TABLE>


<PAGE>






                                    EXHIBITS


<PAGE>







                                  EXHIBIT INDEX


Exhibit Number

         3.1      Affidavit and Certificate of Limited Partnership of CNL Income
                  Fund  VIII,  Ltd.  (Included  as Exhibit  3.2 to  Registration
                  Statement No. 33-31482 on Form S-11 and incorporated herein by
                  reference.)

         4.1      Affidavit and Certificate of Limited Partnership of CNL Income
                  Fund  VIII,  Ltd.  (Included  as Exhibit  3.2 to  Registration
                  Statement No. 33-31482 on Form S-11 and incorporated herein by
                  reference.)

         4.2      Amended and Restated  Agreement of Limited  Partnership of CNL
                  Income Fund VIII,  Ltd.  (Included as Exhibit 4.2 to Form 10-K
                  filed with the Securities and Exchange  Commission on April 1,
                  1996, and incorporated herein by reference.)

         10.1     Management  Agreement  between CNL Income Fund VIII,  Ltd. and
                  CNL Investment  Company (Included as Exhibit 10.1 to Form 10-K
                  filed with the Securities and Exchange  Commission on April 1,
                  1996, and incorporated herein by reference.)

         10.2     Assignment of Management Agreement from CNL Investment Company
                  to CNL Income Fund Advisors, Inc. (Included as Exhibit 10.2 to
                  Form 10-K filed with the Securities and Exchange Commission on
                  March 30, 1995, and incorporated herein by reference.)

         10.3     Assignment  of  Management  Agreement  from  CNL  Income  Fund
                  Advisors, Inc. to CNL Fund Advisors, Inc. (Included as Exhibit
                  10.3 to Form  10-K  filed  with the  Securities  and  Exchange
                  Commission  on April  1,  1996,  and  incorporated  herein  by
                  reference.)

         27       Financial Data Schedule (Filed herewith.)